The ongoing uncertainty regarding Brexit has been ratcheted up this evening with news that the Labour Party has agreed in principle to back a “People’s vote”. Speculation this evening suggests that in exchange for voting Theresa May’s Brexit deal through Parliament the Labour Party will back a “People’s vote”. In what appears to be a blatant attempt to reduce the number of defections to the new independent party, made up of former Labour and Tory MPs, the UK political system is set to enter a period of extreme turmoil.
Investors shaking heads at uncertainty
All along this Brexit journey the Labour Party under Jeremy Corbyn, himself a fierce critic of the European Union, has promised to respect the will of the British people. While some will highlight the fact that Scotland voted to remain, as did Northern Ireland, this was a UK wide vote not one for individual members of the Union. As a consequence, the UK should in theory be leaving the European Union on 29 March 2019. Will this happen?
Watch the money markets tomorrow
The money markets will react to this evening’s news and give the strongest indicator of underlying investor concern for the future. It will depend upon which media outlets you peruse tomorrow as to the spin given to this evening’s news. When it comes to the money markets, stock markets, etc it comes down to good old-fashioned fear and greed. So, we stand on the verge of a situation where Theresa May’s hated Brexit deal will likely be waved through the Commons and then the Labour Party will campaign against it in a “People’s vote”. How this passes for joined-up politics is anybody’s guess?
Will sterling take a hit?
Recent trading show that sterling took a hit when the Labour Party’s proposed move was announced but has since recovered. It may be that investors now believe that Brexit could be blocked and eventually cancelled in the short to medium term. This will ensure that the UK remains a member of the European Union although many people will not be aware that, upon leaving the European Union, the UK will also lose its valuable rebate if it does ever re-join. It is all turning into a mess!
Property investors
Ironically, the UK property market could benefit from “kicking Brexit into the long grass” with a likely short to medium-term recovery in sterling. Recent indicators suggest there is a significant amount of money waiting to be invested in the UK property market from overseas investors. If, as many believe, sterling does recover in the short term they may see the net fall in the exchange rate since 2016 as too good an opportunity to miss.
It is also interesting to see that foreign investment in London, a market which has come under huge pressure, has risen significantly in the last couple of months. Have we seen the worst of Brexit? Is Theresa May’s Brexit deal set for a slow and painful death? Will pent-up demand for UK property, from overseas and UK investors, finally be released?