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May pledges to drive Brexit plan through despite Cabinet turmoil

By Frank Prenesti

Date: Thursday 15 Nov 2018

LONDON (ShareCast) - (Sharecast News) - UK Prime Minister Theresa May vowed to push through her Brexit after a day of turmoil that saw two Cabinet ministers quit and MPs openly talking of a no-confidence vote.
Brexit Secretary Dominic Raab resigned on Thursday morning, just hours after Cabinet approved the withdrawal agreement with the European Union. Work and Pensions Secretary Esther McVey also quit her post.

May weathered a torrid three hours in the House of Commons after delivering her statement on the 600 page deal document. Later in the evening she defended the plan at a news conference in Downing Street.

"I believe with every fibre of my being that the course I have set out is the right one for our country and all our people," she said.

"We can only secure it if we unite behind the agreement reached in cabinet yesterday. If we do not move forward with that agreement, nobody can know for sure the consequences that will follow."

"It will be to take a path of deep and grave uncertainty when the British people just want us to get on with it."

Pro Brexit MPs submitted letters of no confidence to Sir Graham Brady, chair of the backbench 1922 Committee. Under Conservative Party rules 48 signatures, 15% of sitting MPs, are required to trigger a vote.

In his resignation letter, Raab, a hard-right Brexiteer, said he could not "in good conscience" support May's deal, particularly over the proposed rules for Northern Ireland and the indefinite "backstop" arrangement that keeps it in the EU's customs and single market regimes.

He told the BBC that he thought the deal will not get through Parliament, and the EU have been "blackmailing" the UK in negotiations.

McVey told May the deal "does not honour the result of the referendum".

Two junior ministers Shailesh Vara and Suella Braverman, plus two ministerial aides also resigned.

The departures now leave May potentially crippled both in terms of her leadership and any hope of a deal with the EU.

Sterling was initially was slightly higher after cabinet had signed off on the deal. However, the currency tumbled on Thursday morning, trading down 1.4% against the dollar and the euro at 1.2802 and 1.1327 respectively as Raab quit and reports emerged that Brexiters were plotting to force a vote of no confidence in May.



DIFFICULT DAYS AHEAD

Several members of the cabinet raised strong objections to the deal during a five-hour meeting on Wednesday night and, facing hostility to the deal and her continued role as party leader, May admitted that she faced "difficult days ahead".

Having been signed off by the cabinet, the deal still needs to clear several more hurdles, including a special EU summit on 25 November, before being put before the House of Commons in early December.

Bookmakers had slashed the odds on May's departure to 4/5 from 3/1 overnight. Home Secretary Sajid Javid was 6/1 favourite to be the next leader, according to Betfair, which also had a second referendum next year at 15/8. At Ladbrokes, Raab was chalked up as the front runner with odds of 5/1, followed by Boris Johnson and Javid at 6/1.

From a financial market perspective, strategists at Credit Suisse in London said that while political uncertainty was currently extreme, "we would argue this is fully reflected in investor positioning in sterling and UK equities".

Their view was that a no-deal Brexit or an early general election are "unlikely", instead expecting the transition period to be extended at a later stage due to the complexities of reaching a deal. "The more it is extended, the closer it gets to the June 2022 election, increasing the likelihood of a potential second referendum."

The FTSE 100 share index closed flat at just over 7,000, while the more domestically focused FTSE 250 finished 1.68% lower at just over 18,500. Bank stocks tumbled, with RBS down almost 8% and Lloyds and Barclays down 4%. House builders also slipped on concerns about the EU divorce process.

"Right now, the market is trying to price in a level of uncertainty that is extremely high. That is bad for the pound and good for bonds. But it is very unclear what the end-state is," said Nomura analyst Jordan Rochester.

Market analyst Craig Erlam at Oanda said: "May has survived resignations before but coming on the back of her final deal, this could be far more damaging if others walk as well."

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