Seismic shifts in the Brexit debate
Things have moved swiftly in the past 24 hours, as both the Conservatives and Labour shift their positions.
Labour pivots towards a second referendum
Polling over the weekend put newly-formed The Independent Group (TIG) on 18%, while cutting Labour to 23%. This is somewhat spurious, since TIG has no policies, but it has quickly become viewed as a centrist grouping that might capture some remain votes. As a result, Labour’s polling has suffered. The move to back a second referendum represents two things. First, it is designed to stop more Labour members of Parliament (MPs) leaving to join TIG – by committing to a second referendum Labour keeps its Remain MPs on side, at least for now. Second, it indicates that Labour has made the choice between its Remain supporters in the cities, usually in affluent areas, and its Leave-voting constituencies, which are mostly in the north.
As Labour MP John Mann noted, Jeremy Corbyn may well have just lost the race to become prime minister (PM) – the Leave-voting constituencies are more numerous, and have been the heartland of its support for decades.
But the commitment to a second referendum means little unless Labour can find a majority for it in Parliament. It might get as many as 288 MPs backing it, but it would still be 31 short of a majority. Thus the move might not result in much, but it would allow Corbyn to say he has argued for a referendum but has been thwarted by the government.
It looks like the goal here is to prevent no deal but also prevent the Prime Minister Theresa May's deal from passing. All other options are on the table, but a number of Labour MPs have made their discomfort clear. This might paper over the splits for now, but they are likely to come back into focus.
Theresa May looks to remove ‘no deal’
Once upon a time, ‘no deal was better than a bad deal’. While a sensible negotiating strategy, the approach has finally prompted some ministers to declare that they would resign from the government if no deal is not removed. It looks like the PM will allow Parliament to close off a no deal option, either by voting on it after another defeat of her deal, or by the Cooper-Letwin amendment being passed tomorrow.
This allows her to say that she was for delivering Brexit by 29 March but that Parliament has frustrated this. By allowing a vote on extending Article 50, she extends the process but doesn’t rule Brexit out entirely. However, the longer it goes on, the more public opinion might turn against the whole thing. Thus, her move now may be to convince the European Research Group (ERG) hard Brexiteers that it is either her deal or no Brexit at all. They risk losing the good (a Brexit deal) in order to try for the great (a complete break).
Some Labour MPs may now vote with the government too, if they feel Labour’s position would put their seats at risk.
Is the UK on the road to a hard Brexit?
The next move is the Cooper-Letwin vote on Wednesday. If passed, it will take effect on 13 March, so the PM has time to marshal the forces to get behind her deal. At this stage, she might get the necessary tweaks to reassure some MPs, and also dangle the risk of losing Brexit altogether in front of the ERG and Labour MPs from the Leave constituencies.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Trading around Brexit
Find out how the UK’s exit from the EU continues to affect traders, and discover:
- How you can profit from Brexit
- The markets you should be watching
- Brexit trading strategies for key assets
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.