UK Prime Minister Theresa May has seen her proposed Brexit deal turned down by Parliament in the biggest defeat of a sitting Government in history. Members of Parliament voted against the deal 432 votes to 202. The result was widely predicted, following significant contention on both sides of the House – the number of Conservative rebels totalling 118. Just three Labour MPs voted for the deal.
Critics of the plan fall broadly into two camps; those who believe the plan is not closely aligned enough with the European Union, and those who do not feel the deal goes far enough in securing Britain’s independence from the other member states.
May now has until March 29 to return to negotiations and propose a new deal to parliament or Britain will leave the EU in a ‘no deal’ scenario. EU leaders had previously called May’s plan the “best deal possible” and urged Britain to back the proposal.
Tonight’s defeat has encouraged those in favour of a second refendum, but while many Remainers both public and political are in favour of a ‘People’s Vote’, a second referendum may not be logistically feasible. It requires an Act of Parliament with the backing of the majority of MPs – a cross party initiative which could result in further resignations leaving both main political parties weakened. Neither party wishes to do this with a General Election in the offing.
Stock market closed but pound gains
The pound gained slightly against the dollar following the vote. The U.K. stock market is closed until 8am GMT on Wednesday morning so the impact of the vote on domestic equities is unclear.
Laith Khalaf of Hargreaves Lansdown said that this reflected the market view a ‘softer’ Brexit may be back on the table. “The pound has become the market’s Brexit barometer, and it’s been a volatile night as currency markets digest proceedings in Westminster,” he said.
“Sterling gained ground following the vote, but only recovered ground it lost earlier in the day. Markets think a softer Brexit may start to take shape now the vote has failed, as parliament gains greater control of the process. This is a change in dynamic, as previously government failures have heightened expectations of a hard Brexit, and have weighed sterling down.”
Richard Buxton, manager of the Merian UK Alpha Fund, adds that this may be the beginning of the pounds recovery – though not to highs seen prior to the 2016 referendum.
“In the event of some form of the Government’s deal ultimately garnering sufficient support to pass through the House of Commons, I believe sterling would once again strengthen, although I do not see it regaining pre-referendum levels versus the US dollar or the euro; a strengthening in the region of 5-8% would seem more likely than the approximately 15% rally by the pound that would be required to regain those pre-referendum highs,” he predicts.
Corbyn calls vote of no-confidence
Following the record-defeat, Labour leader Jeremy Corbyn has called for a vote of no-confidence in the Government, to be held on Wednesday following Prime Minister’s Questions. He claimed that the Brexit negotiations, and the subsequent result of the Brexit deal vote proved May had “lost the confidence of this House and the country”.
If MPs were to vote against the Government then May would be forced to step-down, the Government would be disbanded and a General Election would be triggered.
However, the DUP has confirmed it would back the Government meaning Labour lacks the necessary support to win the vote of no confidence.
Buxton believes this result will be the final encouragement needed by May to avert a no-deal Brexit.
“With the no confidence vote in the Government – which it is widely expected to win – now tabled for tomorrow, and against the backdrop of a commitment by the Prime Minister to work constructively across Parliament to seek some form of consensus she can then take to the EU, there is, in my view, an increasing likelihood that a ruinous no-deal Brexit is likely to be averted,” he says.
“It must be acknowledged that not everyone shares this view; patience in the EU is rapidly wearing thin, as the EU’s official statement, released minutes after the result of the vote, painfully shows.”
