Market Insights

The Weigh In

  • By 5pm today we will have the full list of candidates to be the UK’s next Prime Minister
  • Under the new rules, each candidate requires 8 MP supporters
  • Round 1 of voting by MPs will then take place this Thursday, 13 June, 10am-12noon. Result expected 1pm.
  • Here is the BlondeMoney forecast based on our MP-by-MP analysis:
  • And here is this support versus each candidate’s BM Brexit Rating (which runs from -15 for the most pro-Remain MP in the House of Commons, to +15 for the most pro-Leave)

We therefore conclude: 

  • Boris Johnson should immediately hit triple figures and burst into the lead. Johnson received a huge boost in the form of ERG leader Steve Baker’s endorsement, exemplifying that the Brexiteer wing of the party is on board.
  • Jeremy Hunt has emerged as the moderate alternative and is currently favourite to join Boris on the ballot. In receiving a surprise endorsement from Liam Fox, Hunt has shown the first signs of the broad appeal that will be necessary if he is to go all the way. The support of Amber Rudd has also boosted his credentials.
  • As illustrated by our Brexit rating chart, the bulk of support currently lies on the extremes of the party. But could a compromise candidate emerge?
    • Sajid Javid – Sitting almost perfectly between Johnson and Hunt, he could pick up votes from MPs hoping to keep the party united after a divisive leadership race.
    • Michael Gove – in recent media interviews, Gove has tried to soften his image as a hard Brexiteer and move himself towards the centre ground that Javid currently occupies. This has been somewhat successful as he has picked up endorsements from both Remainers like Nicky Morgan and more pro-Brexit MPs such as Richard Bacon.
  • If our predictions are correct, the field could shrink by nearly half after just one round of voting. If a unity candidate is to emerge, they will require a large proportion of support from the first eliminations in order to mount a serious challenge on Hunt and Johnson at the front of the pack. It is their supporters who will decide who wins the overall contest.
  • The real question here is whether middle-of-the-road Conservatives will look to Johnson or Hunt once their first preferences have left the race.
    • If polling continues to indicate that Johnson is popular among the membership, then they will rally to his side in the hope of currying favour once the contest is over.
    • If moderate MPs continue to make noises about resignation in the event of a Johnson victory, or of bringing down the government over the risk of No Deal, then Hunt will gain support as the man to keep the party together moving forward.
  • Whoever wins, note that the leading Brexiteer candidates are now promising potentially undeliverable tax cuts along with reopening the Withdrawal Agreement. Boris says he will withhold the £39bn divorce bill until the right deal is done. Meanwhile on the parliamentary time available until the new October 31st deadline, today would be equivalent to January 15th, when the first Meaningful Vote was held. Tick tock goes the Brexit clock, counting down to No Deal….

++ If you would like to see our full scenario analysis for who will become the next UK PM please email us if you haven’t already done so ++

European Parliament Elections – What to watch out for

Ignore headline hysteria about a populist takeover of the EU. Rather, today’s European Parliament elections should prove to be yet another chapter in the story of how the public’s faith in institutions is ebbing away, leading to more volatile policy-making ahead.

Watch out for how many seats are won by:

  • Orban’s Fidesz (current 11, expected 15)
    • Will he work with other populist parties?
    • Even if he doesn’t announce that he will sit with their grouping, he can use this sword of Damocles to hang over the head of the EPP and push policy in his direction
  • Farage’s Brexit Party (current 0 (although UKIP 24), exp 25)
    • Not only in terms of how it will affect UK politics but also how it impacts future Brexit negotiations
  • Macron’s La Republique en Marche (current 0, exp 21)
    • How much have the Gilets Jaunes protests taken their toll on Macron’s power?
    • Le Pen’s National Rally is expected to win 22 seats, so there will be some comfort for Macron if he can beat them into second place
  • The Greens (current 51, exp 55)
    • A good showing and we can conclude that broad discontent with institutions is driving European politics rather than populism per se

We will find out:

  • Can populist parties work together?
  • How strong is anti-establishment sentiment across Europe?
  • Is there any hope left for the historic major parties?

We already know:

  • These elections will deliver a more fragmented European Parliament, frustrating policy-making
  • Policies will be dragged towards the extremes as the historic centrist parties struggle to survive
  • The hegemony of France and Germany over the direction of Europe is waning, leaving an uncertain future ahead for the European Project
  • Italy is on course for a fiscal showdown with EU institutions

In one chart:

The legacy blocs of the centre-right EPP and centre-left S&D can only be propped up if the Alliance of Liberals and Democrats for Europe is saved by Macron (courtesy of Open Europe):


Forget Brexit

  1. Cross-party talks resume tomorrow but they are almost entirely irrelevant
    • Even if the leadership teams can agree on something, the lack of discipline within both parties leaves them unable to be sure if their own MPs will back it
      • Labour Deputy Leader Tom Watson has his own anti-Corbyn centrist “Future Group” numbering almost a third of Labour MPs ready for action. He has called for a second referendum as the “only way” to unite the country
      • Conservative leadership candidates are falling over themselves, with the race now being described by one MP as having “more runners and riders than the Grand National” – 18 at the last count
  2. The Brexit damage has been done.
    • The country did not leave on 29th March 2019, and, while a short delay could have been stomached, ballot papers for European Elections are now hitting door-steps across the country
    • Everyone is therefore unsurprised that Farage’s Brexit Party are storming ahead in the polls – now hitting 34% in the latest from Opinium:
    • Everyone is similarly unperturbed by this, given that UKIP were polling at the same level at the same point in the previous EU election campaign
    • But let’s compare the polling in a General Election.
      • Back in May 2014, it didn’t look great for the Conservative Party, with Labour in the lead, albeit by a small margin:
      • Here is the latest ComRes poll:
      • Yes, when the big bad UKIP threat forced David Cameron to pivot towards a referendum in order to win a majority in the 2015 General Election, the Conservative Party were panicking about polling around 32%. They are now polling under 20%. Farage’s Brexit Party is already decimating them. 
  3. This might just be a flash in the pan irritation. Conservative MP Damian Hinds certainly spun that line when he told the Andrew Marr programme today that ‘For some people, this is going to be the ultimate protest opportunity. Many people use the euro elections as a free vote, and this will be even more so this time’
  4. We think not. We think this is the beginning of the end of the Conservative Party and certainly the end of two party politics in the UK. This ushers in a secular shift towards more volatile and unstable governments in the decades ahead. 
  5. Note that the rise of Farage perversely makes Corbyn a more likely Prime Minister due to the vagaries of the First-Past-The-Post system. The brilliant Electoral Calculus website allows us to look at what the ComRes poll would look like in terms of seats:
  6. The Conservative Party are now more consumed with the best time to get rid of a leader that under their own rules they can’t remove, than seeing off the existential threat of the second coming of Nigel Farage (‘this time it’s terminal’).
  7. Time makes their disintegration inevitable.
    • Everyone wants to be leader but not right now, meaning in the vacuum the party can continue to fight with itself
    • It’s becoming impossible to coalesce around a replacement leader now that everyone thinks they can have a go. Even grassroots website ConservativeHome warns “There are too many leadership candidates”.
    • With Labour facing its own internal party management issues, the opposition is not there to provide a disciplining force on the Conservatives. Indeed, right now both parties are being pressed into working with one another rather than against
  8. Even deadlines are not strong enough deadlines to force action.
    • On June 15th, the PM faces an unprecedented motion of no confidence in her leadership at an Emergency General Meeting called by local constituency chairmen. But it is non-binding.
    • The Confidence-and-Supply arrangement signed with the DUP comes to an end next month. But who will Arlene Foster believe will be her partner in the months to come?

We warned in February over complacency that ‘the centrifugal forces spinning out towards No Brexit or No Deal are thought to provide a centripetal force to bring everyone back towards Theresa May’s Deal‘. The centrifugal forces will ultimately spiral out of control, whatever happens on Brexit. The pendulum has been set in motion.

Nothing. Has. Changed? Part V

  1. The EU27 has offered the UK an extension until 31st October:
    • which can be ended at any time a deal is done
    • there will be a review at regular EU Council Summit on 20-21 June
    • if the UK doesn’t take part in the European Parliamentary elections it must leave on June 1st without a deal
  2. This is shorter than EU Council President Tusk had recommended and is a compromise between Germany’s year-end suggestion and France’s hardline stance of pre-European Parliament elections
  3. It is the worst of all worlds:
    • Removes time pressure to force a decision but doesn’t quite provide enough time for air to clear through a General Election or Second Referendum
    • A conclusion any time in 6 months along with cliff edge on 1st June makes it very difficult for businesses to plan ahead
    • With Party Conference season in Sept/Oct, it’s not clear anything will be sorted before the Conservatives choose a new leader
    • Nor long enough to be clear that EU will be dealing with Jeremy Corbyn
  4. It is the most inconclusive of fudges
  5. But we do now know:
    • There are now two No Deal cliff edges of 1st June and 31st October
      • A mechanism for No Deal has now been introduced, by not participating in European Parliament elections. Brexiteers could bring Vote of No Confidence in Govt on 22 May, for example:
    • Extensions can be long and can be numerous – Risk of No Brexit has increased
  6. Expect political paralysis in the UK for the next six months:
    • Fear of Boris means Remainers won’t depose May, while Fear of a Remainer means the Brexiteers in Cabinet won’t move either
    • Keeping TM running the Brexit process benefits Labour, who can keep the focus on her inept leadership and split Party while avoiding that spotlight being shone upon them
    • Remainers and Brexiteers can use the delay to embolden momentum for their cause: voter anger to rise both for those who now want to jack in the whole process and for those who want to walk out with No Deal
    • TM will not herself resign as she is Brexit Project Manager: She still has Plan A, pass a deal, and she won’t give up. In her press conference she confirmed again that she wants to leave before 30th June. Expect MV4 and more in the next few weeks.
    • She is still trying to balance both halves of her party:
      • Making the extension flexible to be ended at any time, not just at the one review date as the EU27 initially suggested
      • Confirming the importance of trying to avoid European Parliamentary elections by making that a staging post
    • It works in everyone’s favour to blame TM for everything. She’s inflexible in cross-party talks, or over the backstop. She goes back on her word. She’s responsible for a Bad Brexit. Or for leaving with No Deal. Or ultimately for not leaving at all. 
    • No one is incentivised to come to TM’s rescue, so the stalemate will persist
  7. This is not positive for the UK economy or UK assets in the long run. Bad decisions will be made, or worse, no decisions at all. And meanwhile the future of the UK’s relationship with its closest trading partner is no clearer than it was two and a half years ago…
  8. Final point – House of Commons order paper for tomorrow adjourns business until 23rd April, aside from a business motion tabled for 5pm, which could require MPs to sit on Friday 12th April. Time for TM to force one last meaningful vote before the Easter holiday….??

Lewin Amendment Explainer

Yvette Cooper and Oliver Letwin again attempt to take control of Parliamentary business for the third time. However, instead of another series of indicative votes, Cooper has presented her own legally binding Bill aimed at forcing the Prime Minister to extend Article 50 and avoid No Deal next Friday (Parliament has published their own explainer here). This is different from all other amendments as, if passed, it would legally require the PM to do as Parliament mandates. Any extension would of course still depend on unanimous agreement by the EU27 member states.


At 5pm BST, MPs will again vote to take control of the Parliamentary timetable in order to allow time for the above Bill to be put forward. Should the motion be agreed to, the Bill would be pushed through Parliament at superspeed with time allocated for the first reading (once the motion is passed), the second reading – at 7pm – and then the committee phase which will be at 10pm, all in one day with the Bill then going to the House of Lords tomorrow.

There are (at the time of writing) three amendments tabled to Letwin’s Parliamentary Business motion:

  1. Amendment (B): Mark Harper (Con)
    • Leaves the motion as it, but seeks to delay its progress by moving the allocated Parliamentary time to TOMORROW
    • Backed by pro-Brexit Conservative MPs looking to frustrate any extension of Article 50
    • Unlikely to pass given Parliament does not want No Deal
  2. Amendment (C): Robert Syms (Con)
    • Cooper Bill can only proceed if TWO-THIRDS of MPs vote for it at the 2nd reading
    • Another Brexiteer attempt to stop any extension of Article 50
    • Unlikely to pass for the same reasons as above
  3. Amendment (A): Hillary Benn & Margaret Beckett (Lab)
    • Asks for a series of indicative votes on Monday 8th
    • This does NOT take into account that May has now agreed to hold a series of Govt-endorsed indicative votes should her efforts with Corbyn fail, although it does now act as an insurance policy to give time for this
    • Likely to pass given the previous support for this type of amendment

The Cooper Bill itself can also still be amended.

We expect the Govt to whip against the main Letwin business motion and the Benn Amendment. It will be a close call whether they pass on this occasion, given that the PM is trying to move the Brexit process along herself with last night’s announcement of cross-party talks.