In what is turning out to be an extremely eventful and unpredictable week, Theresa May survived a vote of confidence last night by a margin of 200 to 117. This was expected following statements by many Tory MPs in the lead up to the vote, but represents a short-term boost for May.
Conservative Members of Parliament voted at 6pm last night to let May stay on, following Wednesday morning’s announcement that over 48 letters had been submitted to the 1922 Conservative Committee calling for a vote; the threshold required to trigger the vote of confidence. In a perceived act of concession, she also pledged to step down before the next planned election in 2022.
Importantly, this removes one aspect of uncertainty from the Brexit process, as Tory MPs are now not allowed to call another vote of no confidence for a full year. She is, however, still vulnerable to the will of parliament, and it could well be that Corbyn uses the turbulence to try and bring about new elections. The focus now turns to what concessions, if any, May can bring back from the EU.
Sterling has reacted positively, the FTSE 100 is also higher and gilt yields have moved upwards. This outcome already began to price into the markets yesterday, as it became apparent that May would win. Hence, sterling is now 1.6% off the lows from earlier this week. The FTSE 100 has moved 1.2% higher since yesterday morning to 6890, suggesting a more positive tone in the markets for the time being.
Markets are still acting rationally at this point and we remain comfortable with our cautious positioning and diversified portfolios.
We continue to closely monitor the situation and will update you on any important changes as they occur.
If you have any questions on your portfolio please contact your usual Brown Shipley adviser.
Robert Van Kleeck
Senior Fund Manager
* Source Bloomberg
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