Update 13 December:
Yesterday’s vote of confidence against PM Theresa May saw her win 200 votes to 117. Whilst this is positive for her, it still means she doesn’t have support from a third of her party when it comes to negotiating and passing the proposed Brexit agreement.
Update: 11 December
Today, British MPs were supposed to vote on the current Brexit deal. However, after expectations that the deal would have 187 votes against 419, UK Prime Minister Theresa May has delayed the vote to avoid the almost certain defeat. To put the number into perspective, the deal needs 320 votes to pass.
So, where does this leave the UK? Not in a great position if we are being honest.
There is no majority within the UK’s political factions that are in favour of any course of action. To recap, the potential options are:
A no deal. This would see the United Kingdom leaving the EU with nothing but their dreams, some debt and a good cup of tea. Definitely no trade deals, border negotiations or things that are quite important for the wellbeing of the UK’s economy and best interests of the citizens.
Joining the European Free Tree association. Once again, there is no real majority in favour of this.
A people’s vote on a Brexit agreement.
A second referendum to see if UK citizens are still in favour of leaving the EU. While some of the population could vote differently in a second referendum, obviously a second referendum undermines the original referendum at a considerable cost to the UK’s economy. According to a written statement to Parliament from March 2016, the estimated cost of conducting the original referendum was a whopping £142.4m. Imagine paying that bill again.
Most citizens and politicians alike are against a no deal, but also have no alternative as to what a deal should look like. It has been confirmed that the UK can decide not to leave the EU if they wish, however the EU has made it clear that they will not renegotiate the withdrawal agreement. Crikey.
The lack of support for any of the options has resulted in the odds of a no deal rising exponentially. It is also highly likely that the March 29 Brexit deadline will be extended.
If you haven’t already guessed, the UK government is in disarray at the moment. Or, as my dad would say, they are running around like a bunch of headless chooks. The prospect of a general election is becoming more likely, especially amidst calls for May to resign. If that’s the case, who would take her place, and would she ever get the chance to work in ye old London town again?
This growing mass of uncertainty has reflected on the pound’s performance, pushing it down lower against most major currencies.
If you’re travelling to the UK soon, it's definitely worth keeping a close eye on Brexit news to see how they are affecting the GBP. Maybe also take them some tea, everyone sounds really stressed over there.
Update: 29 November
Overnight saw the UK Treasury and Bank of England (BoE) provide risk assessments of potential Brexit scenarios.
The Treasury forecast that a ‘no-deal’ scenario would lead to a 9.3% hit to UK Gross Domestic Product (GDP) over 15 years. The BoE forecast the same scenario would lead to a 25% fall in GDP, thus resulting in a need for the Bank to increase interest rates to 5.5% to control inflation.The Treasury didn’t forecast the recently agreed deal with the EU, however, a close variant was modelled. The model showed a 3.9% decrease in GDP over 15 years. Whilst this is definitely better than the consequences of a ‘no deal’, both institutions agree that the UK will be poorer economically under any form of Brexit situation, compared to just staying in the EU.
In addition to this, talk of a second referendum is continuing to grow. It will be interesting to see what happens in the coming weeks as Prime Minister Theresa May continues to rally MPs for support of the current agreement. Should May not gain enough support during the vote on 11 December, the UK will need to return to the drawing board and face the reality of a ‘no-deal’ scenario.
Therisk assessment scenarios did not have a major impact on the pound against the AUD; even so, the market will remain extremely cautious as we move through the next few weeks.