Pound rises after MPs reject Theresa May’s Brexit plan in historic defeat
The pound has risen after Theresa May’s Brexit plan was rejected by an overwhelming majority of MPs.
The PM’s deal was defeated in the Commons last night (January 15) by a margin of 230 votes, opening up the possibility of renegotiations, a second referendum or even the UK crashing out of the European Union without a deal.
MPs rejected the PM’s deal by 432 votes to 202 – the heaviest defeat ever for a sitting government.
In the wake of the vote, the pound rose 0.05% against the dollar to $1.287. It follows declines of over 1% earlier in the day.
In 2018, the value of sterling dropped 7%, reflecting uncertainty about the terms of the UK’s imminent departure from the EU.
According to one analyst, the currency has become “the market’s Brexit barometer”.
Laith Khalaf, senior analyst at financial services firm Hargreaves Lansdown, said: “Markets think a softer Brexit may start to take shape now the vote has failed, as parliament gains greater control of the process.
“This is a change in dynamic, as previously government failures have heightened expectations of a hard Brexit, and have weighed sterling down.”
He continued: “Clearly there’s still no certainty to be had, and tomorrow’s vote of no confidence provides another pinch point for currency markets, so we can expect further swings in sterling as events develop.
“The reality is there’s no correct price for sterling until there’s greater resolution on the direction of Brexit, what we have right now is a middle ground between competing possibilities. Assuming Brexit does resolve itself one way or another, the pound will ultimately find a new level, but it’s not going to be a smooth journey.”
According to Ian Wright CBE, chief exec of the Food and Drink Federation, it is now “vital” for the political leadership to offer clarity by finding a way to indicate what alternative should be pursued.
He explained: “We are calling for an extension to the transition period in order for parliament to decide what our next steps are; whether that is a new deal, a referendum, an orderly exit from the EU without a deal at a later date, or a general election.
“The Government should now be looking to speak with representative organisations such as the FDF, to ensure they are pursuing an alternative that prevents further damage to the UK’s wider economy.”