Market Insights


The UK no longer has a functioning government.

  • Yesterday evening, the Government was found in contempt of Parliament for the first time in its history. Yes, in history.
    • Its alleged confidence-and-supply partners voted to bring the contempt charge and then voted for it
    • This despite the Attorney General taking 2.5 hours of questioning yesterday, following it up with a letter to the Speaker to make the case for why the legal advice must remain secret, and then publishing that letter
  • The government lost an amendment brought by Dominic Grieve which now means that, if the Meaningful Vote fails, Parliament can propose new amendments
    • This means in practice that Parliament, not the government, determines what happens next
    • 26 Conservative MPs voted against their own Party to push this through

A government hobbled by its own minority status was always going to struggle. But the degree of rebellion at this stage, before we have even got into the meat of the Meaningful Vote, means that it has gone full Norwegian Blue. It has ceased to exist.

Having survived this far, there had become a kind of dazed belief that Theresa May would battle on through. This was to mistake the past 12 months. All sides have been cooking up their plans, ready to pounce. We are now entering that crunch zone. Dominic Grieve actually brought this same amendment back in June, when TM previously suffered a wobble. He then voted against his own amendment as he ‘felt the Prime Minister was listening’. The truth is that he didn’t want to pull the disloyalty trigger back then. Now, it can be done with impunity, with the government on its knees and time ticking down the clock.

BlondeMoney keeps hearing that recent machinations are just flushing out the loons versus the pragmatists. That Labour might want to make a lot of noise about embarrassing the government but they’re just playing to the gallery. That the contempt charge is therefore contemptuous. That Grieve’s amendment is just a mechanism by which a soft Brexit can come about. Ditto the Article 50 ruling.

Sure, that’s one potential outcome. That the silent majority rests with a non-wrecking pragmatic Gove/Boles Norway+ plan, with a hint of possible No Brexit thrown in. That sanity will break out.

As we have often said, if there is one topic that is destined to ensure insanity, it’s Europe.

The threat of No Deal and No Brexit don’t make either side more likely to vote for the middle ground, it makes them more likely to wreck it. And the middle ground would be unable to yield to either extreme. Hence the stalemate. If Parliament can’t agree on what “next” should be, how does the Grieve amendment make anything more likely?

Some argue it reduces the chance of No Deal. That’s because a majority is against No Deal, they say.

But this ignores second preferences. Yes, Remainers and Pragmatists both want No Deal. But they don’t agree on what to do next: Remainders want a second Referendum whereas Pragmatists might favour Norway. There may even be sub-divisions within that, such as “Norway for Now”, or a 3-choice referendum.

The majority is actually several minorities that each support a different path. They may all want No Deal but they prefer something else instead.

Today’s votes mean we can be sure of only one thing: The Grieve Amendment removes leadership, increases the risk of stalemate, and creates a situation that only a No Confidence vote and a 14 day attempt to find a “coalition of the willing” can solve.

Hotting Up

  1. The Advocate General, an advisor to the ECJ, has opined that Article 50 can be unilaterally revoked, with the ECJ ruling expected to follow suit in the weeks ahead
    • For Remainers: this means the mechanism for No Brexit is easier but the process still requires a crisis, otherwise, the public says, “We voted to Leave, now you’re stopping it, WTF?”
    • For Brexiteers: this means they are galvanised to ensure Brexit still takes place
    • For TM and her deal: No Brexit and No Deal are still the other options if it’s voted down, but a+b means both outcomes just became more likely, entrenching positions rather than mitigating them
    • Add these together and a crisis is slowly becoming more likely…
  2. The government’s failure to produce the full legal advice on the backstop to Parliament now leaves it facing a contempt of Parliament charge.
    • This debate could go on until the middle of the night and will give full airtime to those who want to portray the government as blundering on regardless.
    • The public doesn’t have good memories of proceeding on the basis of legal advice, ever since Blair’s “dodgy dossier” for the Iraq War
  3. More ominously for the government, the Deputy Labour Leader Tom Watson was able to claim that the contempt charge has been brought by “six opposition parties”, including the DUP
  4. Even those voting for TM’s Deal are admitting they don’t like the backstop.
    • The man who negotiated it, Oliver Robbins, described it yesterday as “a slightly uncomfortable necessity
    • Arlene Foster’s 24th Nov interview: “All we have ever said to her [the PM] is ‘Please do not cause any divergence between NI and GB’. That’s the most disappointing thing for us and it’s pretty bad”.
      • If your father had been shot and your school bus blown up because of violence over the status of your country, do you think a civil servant describing the potential for that country to be carved up as “a slightly uncomfortable necessity” would make you think that’s alright then? Would you feel reassured the government is working in your favour? Would you trust that they are worthy of your support?
    • Any Conservative leader who might want DUP support needs to realise the backstop cannot stand. And parliamentary arithmetic means any Conservative leader needs their support. If they don’t realise this, events will force them to realise it.
  5. Yesterday the BlondeMoney team attended the Intelligence Squared Brexit debate, with Nicky Morgan advancing the case for voting for Theresa’s deal; Dan Hannan advocating the need to renegotiate or walk away; and Andrew Adonis arguing volubly for a second referendum. You can guess the arguments, as well as guessing that the majority of the London-dwelling liberal elite in the room voted for the Adonis view. More notable was the final question of what they expected would happen next (rather than what they wanted):
    • Nicky Morgan believes the vote will fail but we will end up with some kind of Norway
    • This now looks to be a Gove Plot that’s gaining ground:
      •  By voting for the deal, these MPs are not wreckers
      • They can ideologically appeal to pragmatic Brexiteers and soft Remainers
      • They judge that Second Referendum Jo Johnson types and No Deal ERG types won’t muster enough numbers against them
      • Thus providing a broad base for Gove’s inevitable leadership bid as The Man Who Saved the Govt And Brexit
    • This works unless:
      • The deal fails so badly that 48 letters go in and mechanism starts against TM. Then Gove could find those backing his plan will go up against him in a leadership contest
      • The DUP threaten to vote against the govt in a vote of No Confidence. Then the PM must change and/or renegotiation to remove the backstop must happen unless Tories and Labour are prepared to work together (Gove to lead a Govt of National Unity)?

Deal? Update 2

Who resigned? 

In order of the time of their resignation:

  • They’re all on the more Brexiteer side of our spectrum but they’re certainly not all raving ideologues – for comparison JRM is +15, Gove +11
  • They’re from a mixture of seats that voted to Leave and to Remain – and the Leave seats are not as strongly in support of Leave as, for example, some Labour-held seats in the North
  • They all have solid majorities – suggesting that might be less of a motivating factor for how MPs ultimately decide to vote
  • They gave a mixture of reasons, but most common thread is defending the Union – so it’s not just the DUP that have been lost with the special rules for Northern Ireland, but members of what is, after all, technically known as the Conservative and Unionist Party

So this can’t be written off as just a bunch of loony Brexiteers throwing their toys out of the pram. It might just be that MPs have decided to vote on their principles – with half an eye of course on whether they want to be tainted with a deal they feel they can’t sell. This implies the Parliamentary Vote will be even more difficult to win than we thought.


Losing the Brexit Secretary is astonishing. Two have now been lost when the two decision points in the negotiations have been reached. They have both been Brexiteers. If Michael Gove takes up the post (unclear at time of writing), can he be the Brexiteer to bridge the Remainer divide?

It’s rumoured he hasn’t yet taken the job because he wants free rein to renegotiate it. If he gets that mandate, manages to change course (or at least sell a change of course), the parliamentary arithmetic could shift.

Penny Mordaunt hasn’t yet gone as apparently she is demanding a free vote on the final deal in Parliament, i.e. so that MPs are not bound by the PM’s decision.

Adding together Raab’s surprising pique, Gove’s chutzpah, and Mordaunt’s defiance we can see that TM has lost what little power she has left. Theresa unfortunately has a habit of slighting her ministers unnecessarily.

  • Raab was always unhappy that although Brexit Sec, he didn’t really do any of the negotiating, but instead it went through civil servant Olly Robbins.
  • Gove and Theresa have strong personal antipathy so there will be an element of him exacting his revenge
  • Mordaunt evidently doesn’t trust TM’s assurances that it’s her Deal or No Deal; why ask for a free vote as party discipline has broken down so much that it’s likely MPs vote with their conscience without fear of consequence when the time comes anyway

What happens next?

TM lives to fight another day, and, most likely, the weeks until the Parliamentary vote.

  • Despite Rees-Mogg putting in his letter, it’s still unclear whether the magic 48 have been reached to force a leadership contest
  • This is unsurprising as it’s still not clear who the frontrunner challenger would be, or whether they would want it at this stage
    • TM has said she would still run in a contest. Under the rules, if she wins then no-one could challenge her for 12 months. That’s what continues to stay the hand of the ERG: they run the risk of their Brexiteer candidate losing out to TM if she wins centrist and Remainer votes.
    • If anyone actually wanted to take her on they would have challenged her after last summer’s election. Instead, the Boris Johnsons of this world have calculated that it’s better to let her fail completely and then be begged, like Superman, to Save Us All.
  • TM therefore needs fatally wounding, which would clearly come with the Parliamentary Vote

The only thing that could change this and hasten her demise would be a resignation from Gove and/or one of the other Cabinet big beasts like Hunt or Javid.

And then?

Then it’s onto the Parliamentary Vote where we emphasise again that it’s becoming in more and more people’s interests for there to be mayhem. If the government falls to a confidence vote, loose coalitions of the willing will hope they can become the government within the 14 day period before it goes to a General Election that nobody – including the general public – wants.


We haven’t yet heard from the EU27 governments. They only got sight of the document last night themselves. Will they seek also to unpick the deal? Is it too nice to Britain? Must France and Spain object pour encourager les autres, like, say, those autres in Italy.

Market response?

Only today has everyone woken up to the idea that there are a plethora of future paths for the UK, all of which are likely to damage the economy. A new PM, No Deal, or No Brexit. GBP/USD can easily fall back below the 1.1800 lows, particularly when so little is trading and liquidity is already at a premium. Remember the flash crash in Asian hours in 2016? Cable has never had a reputation as the most stable currency pair. It’s already been the biggest drop in 10y Gilt yields since 2016. The question is when UK yields actually rise as an EM-style risk premium gets priced in. Expect more volatility ahead.

Which Labour MPs will vote Conservative?

Attention has moved from the 40-80 Conservative MPs that Steve Baker claims can kill the government, to the 30-40 Labour MPs that Downing Street hope can let its deal survive. The Times and the FT both run stories today on these so-called Labour rebels.

The headline is misleading. The quotes from Labour MPs show just how uncertain they are over how they will vote. They fear deselection. They hope Corbyn will change. They will vote down the government only to vote with them later. Listen below for our 3 minute wrap with more details:


To determine how Labour MPs will shake down, we refer you back to our Labour MP breakdown:

And our table of support for each Brexit outcome:

If you would like more detail on how we calculated these figures, or to run other configurations, please let us know.