In an unprecedented move, yesterday evening saw a small cross-party group of UK members of parliament (MPs) initiate legislation to enable them to wrest control of the Brexit process from Prime Minister Theresa May in a move that will see a series of indicative votes put before the UK parliament tomorrow evening (Wednesday, March 27).
These will constitute a non-legally binding process whereby MPs’ preferences for various Brexit outcomes are whittled down one by one until a preferred outcome is identified. The options are expected to number about half a dozen, and are likely to include the UK prime minister’s existing deal, a so-called ‘no-deal’ or ‘hard’ Brexit, and various shades of compromise deals, all of which are likely to represent a closer relationship with the European Union (EU) than that envisaged by the UK government’s current proposals.
Running Order Critical
Critical to the outcome will be the order in which the Speaker of the House of Commons John Bercow decides to present each voting option, with those towards the end of the running order most advantaged owing to the options being eliminated on a knockout basis. The process is being seen by some traditionalists (and via a strongly-worded statement by the UK government itself), as an undesirable constitutional development that upends centuries of parliamentary precedent by allowing the wider House of Commons to effectively seize control of business from the government.
The initial conclusion from this development, given that approximately 70% of MPs wish to remain within the EU, is that the process could lead to a closer relationship with the EU than that contained within Theresa May’s existing deal. However, as so often within this long-running saga, it is not as simple as that. The emergence of recent comments made by Irish Taoiseach Leo Varadkar appeared to suggest that there will be no need for a border between the Irish Republic and Northern Ireland owing to technological advances, which has led some to question the prominence of the so-called Irish backstop as such a significant sticking point in the Brexit negotiations.
Third Time Lucky for May?
The Northern Irish Democratic Unionist Party (DUP) has not as yet changed its stance in the light of these comments, but if it does, it may be regarded as a reason for the European Research Group (ERG) within the Conservative Party and other Brexit-supporting factions to also change their voting intentions to support the UK prime minister’s twice-defeated deal. One should not forget that the DUP currently holds the balance of power, and may not wish to see its political influence potentially eviscerated by another UK general election. Perversely therefore, Mrs. May’s deal could even be a beneficiary of the tumultuous events in the House of Commons on Monday evening.
Markets have so far welcomed the latest steps in the Brexit process with cautious optimism, with a mildly stronger UK currency the most notable consequence at this stage. However, concerns about the possibility that a meaningful change in tack on UK Brexit policy could lead to a general election (and potentially more instability or a change in government) have so far kept a lid on any positive reaction.
The practical implications of last night’s significant parliamentary developments will be easier to ascertain once the so called ‘will of parliament’ has been expressed tomorrow evening. The possibility of no outstandingly well-supported option, however, remains, and would potentially obfuscate things still further.
Authors
Paul Markham
Head of Global Opportunities
This is a financial promotion. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell this security, country or sector. Please note that strategy holdings and positioning are subject to change without notice. ‘Newton’ and/or the “Newton Investment Management” brand refers to the following group of affiliated companies: Newton Investment Management Limited and Newton Investment Management (North America) Limited (NIMNA Ltd). In the UK, NIMNA Ltd is authorized and regulated by the Financial Conduct Authority in the conduct of investment business and is a wholly owned subsidiary of The Bank of New York Mellon Corporation. Registered in England no. 2675952. NIMNA Ltd is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. NIMNA Ltd’s investment business is described in Form ADV, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request. Personnel of certain of our BNY Mellon affiliates may act as: (i) registered representatives of MBSC Securities Corporation (in its capacity as a registered broker-dealer) to offer securities, (ii) officers of the Bank of New York Mellon (a New York chartered bank) to offer bank-maintained collective investment funds, and (iii) Associated Persons of MBSC Securities Corporation (in its capacity as a registered investment adviser) to offer separately managed accounts managed by BNY Mellon Investment Management firms, including NIMNA Ltd. Certain information contained herein is based on outside sources believed to be reliable, but their accuracy is not guaranteed. Unless you are notified to the contrary, the products and services mentioned are not insured by the FDIC (or by any governmental entity) and are not guaranteed by or obligations of The Bank of New York or any of its affiliates. The Bank of New York assumes no responsibility for the accuracy or completeness of the above data and disclaims all expressed or implied warranties in connection therewith. © 2006 The Bank of New York Company, Inc. All rights reserved.
Important information
This is a financial promotion. Issued by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Newton Investment Management Limited is authorized and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN and is a subsidiary of The Bank of New York Mellon Corporation. 'Newton' and/or 'Newton Investment Management' brand refers to Newton Investment Management Limited. Newton is registered in England No. 01371973. VAT registration number GB: 577 7181 95. Newton is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. Newton's investment business is described in Form ADV, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only.
Personnel of certain of our BNY Mellon affiliates may act as: (i) registered representatives of BNY Mellon Securities Corporation (in its capacity as a registered broker-dealer) to offer securities, (ii) officers of the Bank of New York Mellon (a New York chartered bank) to offer bank-maintained collective investment funds, and (iii) Associated Persons of BNY Mellon Securities Corporation (in its capacity as a registered investment adviser) to offer separately managed accounts managed by BNY Mellon Investment Management firms, including Newton and (iv) representatives of Newton Americas, a Division of BNY Mellon Securities Corporation, U.S. Distributor of Newton Investment Management Limited.
Unless you are notified to the contrary, the products and services mentioned are not insured by the FDIC (or by any governmental entity) and are not guaranteed by or obligations of The Bank of New York or any of its affiliates. The Bank of New York assumes no responsibility for the accuracy or completeness of the above data and disclaims all expressed or implied warranties in connection therewith. © 2020 The Bank of New York Company, Inc. All rights reserved.
