Brexit: Tuesday Afternoon Update

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Posted on July 12, 2016

Story of the Day: High-Level Support for Corbyn Eligibility
The Labour Party’s National Executive Committee has now voted and agreed that Jeremy Corbyn’s name has the automatic right to appear on the ballot of the Labour leadership race.
So what happens now?

With overwhelming support from grassroots supporters and trade unions, Corbyn’s position atop the party seems secure. We have a summer of campaigning ahead with the candidates, so far just Angela Eagle and Jeremy Corbyn. Their fate will be decided at the Labour Party conference at the end of September. In what is hopefully not an indication of the campaign to come, a brick was thrown through the window of Eagle’s office today. Corbyn, who condemned such violence and vandalism, also sadly admitted to receiving death threats this week.
Conservative Party
Prime Minister David Cameron chaired his final cabinet meeting this afternoon. He is due to hand the keys of 10 Downing Street over to Theresa May tomorrow evening when she will be formally sworn in as Prime Minister. Her agenda in the coming days will be to form a cabinet and begin to reunite the party following post-referendum and post-election divisions. At face value, it does not appear this will be a difficult task as there are plenty of current and would-be Ministers — Remainers and Brexiters alike — who are all smiles as cabinet positions become available.
However, a top former aide of Cameron suggested that, while cabinet positions may be shuffled, expect the cast of actors to largely remain the same. We believe a May administration will look to include a mixture of loyalties, both Remainers and Brexiters, for the sake of credibility and party unity. Experience will be of importance and, with three weeks gone after the referendum vote, it is finally time to take the first political steps in establishing a UK outside of the EU.

Analysis has already begun as to when May should trigger Article 50. May will be doing her best to prepare the British camp for extensive negotiations with the EU. She knows achieving some form of immigration control while maintaining access to the single market will be the prize. Our view is that she will want to delay triggering Article 50 for as long as possible. German pragmatism coupled with internal pressure for German goods to access the UK market untaxed will be part of the strategy.

Nevertheless, calls from veteran Tory MP Ken Clarke, German Chancellor Angela Merkel, and the EU Commissioner Jean-Claude Juncker have already begun for May to trigger Article 50 before she even has the keys to Downing Street. As soon as she does this, however, she hands over advantage to her EU partners and the clock starts counting down to exit.

May has said no to a snap election. Even with Labour in total turmoil, she has chosen some stability ahead of the Brexit talks without the diversion and unnecessary energy of a general election with uncertain outcomes.
As the race to succeed David Cameron reached an abrupt finale two months earlier than anticipated, the pound sterling has responded favourably. It is up more than one per cent against the US dollar trading above $1.31. The pound is also up 0.6 per cent today against the Euro trading above Euro 1.18. Property-related stocks have continued their surge to recovery after dramatically falling in the wake of the referendum, although they are still down significantly. Today was also a very quiet day on the FTSE indices, which saw extremely small fluctuations at close.
In testimony before MPs today, Governor of the Bank of England Mark Carney denied accusations of ‘startling dishonesty’ vis-a-vis shaping the views of financial officials and the public by suggesting the dire economic consequences of leaving the EU. The lawmakers accusing him may have failed to notice the pound reaching a 31-year low following the referendum.
MPs in the House of Commons supported a first reading of a bill protecting the rights of EU citizens to remain in the UK. Known as a ‘Ten Minute Bill’, it is not legislation but rather a process undertaken in a show of support to EU nationals living in the UK and to focus attention on the matter.
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