The UK’s Political Earthquake Spreads

The political consequences of Brexit have so far been bigger than the economic. That may change in the weeks, months and years to come, but for now most of the attention is focused on the rapidly unfolding developments in Westminster and Brussels

The Chancellor surfaces

In the three days since the Prime Minister and Governor of the Bank of England made their statements, people could have been forgiven for thinking the Government had gone into hiding with ministers noticeably absent from weekend TV programmes.

The Chancellor finally surfaced this morning, taking to the airwaves to reassure the markets that the UK economy was sound and appealing to business to continue to invest. He said that his objective for Brexit negotiations would be for the UK to have the strongest possible economic links with the EU.

However, how much of a role Osborne will now play is open to question. Although he had just days ago said he would need to introduce an emergency budget in the event of a Brexit vote, today he announced that any fiscal adjustments could await the election of a new Tory Leader and Prime Minister in the autumn. That was perhaps a reflection of his own weakness and the fact that he would struggle to get any emergency budget through the House. Reports suggest that the Chancellor sounded out colleagues over the weekend about his prospects of standing for the leadership. The responses suggested that not only would he stand little of chance of running himself, but that other candidates would not want his endorsement.

Boris rows back

Boris Johnson meanwhile appeared to step back from his campaign rhetoric against the single market using his Telegraph column to say he expected still to have access to the single market, though with a right to control immigration. Whether this proves appealing to other EU countries is doubtful.

Article 50 delayed

The consensus across the UK political spectrum is that the Government should take its time before invoking Article 50, which triggers the legal process for withdrawal from the EU. The Chancellor this morning said that the Article should be invoked only when there was a clear plan for a new relationship with the EU. The response in EU capitals is divided. Commission President Juncker has called for the UK to invoke Article 50 immediately but statements from German Chancellor Merkel have been more emollient, suggesting she is happy to await the election of a new UK Leader.

[Getty Images]

Leave remains

The issue of when Article 50 is triggered is crucial and is being keenly watched around the capitals of Europe. But it is also being carefully observed at home and many on the Leave side are turning their focus to the process and nature of post-referendum negotiations. The Leave campaign has apparently retained significant funding and instead of disbanding is looking to develop its role as the guardian of Brexit and as a pressure group lobbying whoever becomes Prime Minister.

Scotland and Northern Ireland

Scottish and Northern Irish politicians will also have a significant influence in the process of negotiation. Nicola Sturgeon in particular is likely to play a critical role. She has already suggested that the Scottish Parliament could try to impose a legal block on EU withdrawal, and is weighing up the pros and cons of calling for a second independence referendum. While some polls suggest support for independence has risen, she understands that the dynamics of a new vote – where issues such as what future currency to use would be much more controversial – are harder to read.

The Tory leadership election begins

Focus today and this week will shift to the Conservative party Leadership election. Already in the party, MPs are grouping around Theresa May as the strongest candidate to stop Boris Johnson. She appears to be attracting support from most Remain MPs plus some in the Leave campaign who are sceptical of Johnson’s ability to lead a government. Johnson is likely to be supported by the majority of Leave MPs and Michael Gove is likely to chair his election campaign committee.

Other runners and riders are likely to emerge in the coming days, with early signs suggesting there could be a wide field, at least to begin with.

The backbench 1922 committee meets tomorrow – or even sooner – to agree the process for the Leadership election. There are reports that they will seek to expedite the timetable as media pressure grows for the Government, and the Brexit leaders, to demonstrate that they can grip the new situation and come up with a plan of action.

Labour in turmoil

Meanwhile the principal Opposition party is in disarray. Hilary Benn was sacked late on Saturday night, prompting 11 leading members to resign from the shadow cabinet in an attempt to dislodge Jeremy Corbyn from the Leadership. Resignations of front bench spokespersons have continued this morning

However, Corbyn is refusing to budge and has responded to the insurrection with a new shadow team which is populated with his closest allies. In a provocative move, Clive Lewis MP, the anti-Trident left winger, has been appointed shadow Defence Secretary and will lead the Opposition in oral questions at 2.30pm today; assuming he returns from Glastonbury in time.

Watson begins to move against Corbyn

The role of Deputy Leader Tom Watson is crucial. Having initially refused to back Corbyn, he has now told the Labour leader that he has lost the confidence of the PLP. Given Watson’s closeness to the leadership of Unite, his intervention could be a sign that union support for Corbyn is weaker than earlier statements suggested.

PLP showdown

The picture is rapidly changing but as things stand the Parliamentary Labour Party meets at 6pm to discuss the motion of no-confidence tabled by former minister Margaret Hodge, with voting expected on Tuesday. In this unprecedented situation, no-one is clear what happens in the event of a no-confidence vote. But a political confrontation is inevitable and whatever the outcome it is difficult to see how the Labour Party avoids some form of split in the coming period.

An early general election

It now seems more likely than not that a new Conservative Leader will seek an early dissolution of parliament to secure a mandate for negotiations on Brexit. In effect, this could mean a further delay to Article 50 until the new House of Commons meets. At this stage, it would seem likely that a Conservative Party with a new Leader would be victorious possibly with a bigger majority. However, the referendum outcome has left the 48% who voted Remain angry and motivated, as happened with the losing side in the Scottish referendum. In these circumstances, the political fall-out is much more difficult to predict. A Labour Party with a new, more centrist Leader, could do a lot better than seems possible at this stage.

Implications for business

For business, the uncertainty will continue at least for most of the rest of this year. But since the process of quitting the EU is also likely to be delayed, this gives an opportunity for individual companies, trade organisations and business groups to prepare more strategically for the negotiations to come and help shape the approach of politicians and government to the future shape of the relationship between the UK and the EU.


By Lexington Communications