Brexit: Tuesday Afternoon Update

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Posted on July 5, 2016

Story of the Day: Johnson backs Leadsom
Yesterday, Boris Johnson announced his support for Andrea Leadsom’s bid for the Tory leadership. Polls opened this morning with 330 Conservative MPs voting by secret ballot to narrow the field of leadership candidates from 5 to 2. Johnson’s support for Leadsom will certainly boost her campaign and it is likely to push her into second place. The latest poll among Conservative Party members indicates that Teresa May is the favourite with 54 per cent of support. Late last week, Michael Gove was among the top contenders for party leadership but has since seen his popularity and reputation plummet more sharply than the pound sterling.
Following today’s results, the next round of polling will be open to the Conservative Party’s 150,000 members, culminating in a new Conservative Leader and Prime Minister 65 days from now on September 9. The possibility remains that pressure will mount to appoint a PM earlier if we move from what is currently a political crisis to an economic one.
Labour Party
Today marks the Labour Party’s tenth consecutive day of pandemonium. Labour Deputy Leader Tom Watson is meeting with union leaders who make up a vital support group for the party. The aim is to secure the resignation of the increasingly adrift and unpopular Jeremy Corbyn. If Watson’s efforts among the trade unions are unsuccessful, expect to see Angela Eagle or Owen Smith mount a formal challenge for party leadership.
Sadly, one of the strongest potential uniters in the Labour party, Sadiq Khan, has just become Mayor of London, almost certainly ruling him out as a potential leader. If Labour fails to resolve its leadership issue, there is a real danger the party may split.

Meanwhile, Jeremy Corbyn released a video today reaching out to Labour supporters, trade unionists, and his movement as a whole to unite the party and come together against the Tory leadership. Although unpopular with the Parliamentary caucus, he almost certainly retains grassroots support among the membership.
The UK Independence Party (UKIP)’s only MP in Westminster, Douglas Carswell, has entirely ruled out the possibility of standing for leadership of the party in light of Nigel Farage’s departure. Meanwhile, Deputy Leader Paul Nuttall has shown interest in the post. Nuttall has called for party unity, knowing that if the Labour Party fragments, UKIP may attract many Labour supporters. UKIP will likely continue to contest and win seats should they feel that Brexit hasn’t delivered on its promises.

The Markets
This morning markets dipped in anticipation of the Bank of England’s release of their Financial Stability Report. While the FTSE 100 rebounded, the FTSE 250 fell by more than 2 per cent. Governor Mark Carney emphasized the importance of the FTSE 250 as a more precise gauge of the domestic market in Britain. Carney also indicated that, given the uncertainty since the referendum, the markets have handled themselves well. Now, however, the risks stemming from Brexit have begun to crystallize. The Bank of England announced that it will be cutting restrictions on banks to boost lending up to ᆪ150 billion. Fortunately, Carney’s countercyclical contingency fund was built up for these times of economic downturn and volatility. With limited political control, Mark Carney’s confident interventions with the market are key. Following his speech, the markets began climbing. Slightly.

Chilcot Report
The overdue Chilcot report is due to be released on Wednesday, which may well, for a moment, give the UK pause from Brexit. The 2.5 million-word report, commissioned by former PM Gordon Brown in 2009, examines the Tony Blair government’s role in the Iraq War. It will analyze events leading up to the war, decision-making processes, military action, and its aftermath. It will address questions regarding the legality of the war as it was launched without a mandate from the United Nations as well as controversial questions of potential war crimes and manipulated evidence.
The UK people are interested in what the report says about Tony Blair, and will he, albeit unlikely, face any legal action. It will be interesting for Corbyn as he is anti-Iraq, anti-New Labour and anti-Tony Blair. He may well feel he has the permission to say in Parliament exactly what he always has said, ending with an emphatic ‘I told you so’. Whether this is enough for him before stepping down remains to be seen.
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