UK: Immediate uncertainty has been reduced – BBH

Research Team at BBH, suggests that the most recent drama has been in the UK as the immediate uncertainty has been reduced. 

Key Quotes 

“A new Tory government is in place, and the Bank of England has signaled that it will most likely ease policy (and probably more than simply cutting the base rate).  It is also clear that despite the fact that Cameron's successor is in office 2-3 months before initially anticipated, Prime Minister May is in no hurry to trigger Article 50. 

The Labour leadership challenge is getting underway, but it is simply a mess.  Previously rules required that one became an official candidate (name on the ballot) if some Labour MPs endorsed them.  However, the rules were apparently changed last week to allow the current party leader Corbyn to be on the ballot.  It was also decided that the some 130k people who joined the party since the start of the year, including those that joined since the referendum, would not be allowed to participate in the election of a new leader (they must be a member for six months).  On top of these changes, Labour raised the price of voting (for party leader) from GBP3 in 2015 to GBP25. 

May indicated she has no intention of calling a snap election.  Given the disarray of the Labour Party, the Prime Minister may reconsider at some point.  However, the Fixed Term Act of 2011 complicates matters.  It effectively transfers the decision to call a snap election from the Chancellor to the House of Commons.  Such an important decision requires 2/3 parliamentary support, not the simple majority on which the referendum was decided.  An early election can also be called if the government loses a vote of confidence.  Imagine the confusion that can be caused by May turning the triggering of Article 50 into a vote of confidence, and then losing it (as a majority of MPs favored remaining within the EU).”