Ex-Tory rebel Richard Benyon to exit politics
The FT’s Sebastian Payne writes:
Richard Benyon, the MP for Newbury and one of the 21 rebels expelled from the Conservative party last week, has announced he will not be standing again. In a statement, he said that there had been discussions about bringing some of the rebels back but he was leaving politics:
Sterling hits highest level in six weeks
Eva Szalay, FT currencies correspondent, writes:
Sterling climbed to a six-week high against both the euro and the dollar on Monday after investors reacted to better-than-expected economic growth data for July and as traders with negative bets unwound their positions amid a more-optimistic Brexit backdrop.
The pound traded as high as $1.2360 and the euro weakened to £0.8926 after UK prime minister Boris Johnson told his Irish counterpart Leo Varadkar that he wants a deal to be agreed on Brexit. Investors are waiting to see if the PM could defy a bill that is expected to become law later today that would require the UK to ask for an extension to the current October 31 departure deadline.
“The market was very negatively positioned last week and any good news like headlines this morning will trigger large knee-jerk moves,” said Jane Foley, head of currencies strategy at Rabobank in London.
Part of the good news for sterling came from UK data, which showed that the country’s economy grew at 0.3 per cent in July, outpacing analysts’ estimates for a 0.1 per cent reading.
“While parliament seems to be falling apart, the economy is holding up reasonably well. July’s surprisingly strong rise in GDP suggests that it has not fallen into a recession,” said Paul Dales, chief UK economist at Capital Economics.
Former Tory Margot James would vote for Johnson Brexit pact
Margot James, one of the 21 rebels ejected from the Conservative party last week, has said that she will vote for Boris Johnson’s Brexit deal if he can bring one back, writes the FT’s Edwin Esosa.
When asked on BBC television whether she wants Boris Johnson or Jeremy Corbyn to be prime minister, she replied “neither”, adding that she hopes the outcome of an election, if called, would be a coalition government lead by someone more moderate than Messrs Corbyn or Johnson.
She said “There are decent people within the Conservative party, the Labour party and within the Liberal Democrats who could lead”.
Ms James also said that she has not ruled out joining the Liberal Democrats and that she won’t be voting for the Conservatives in a potential general election.
FT poll shows voters prefer Johnson to Corbyn
In case you missed it:
Boris Johnson is seen as a better choice of prime minister by almost twice as many voters as his rival, Jeremy Corbyn, according to a new poll for the Financial Times.
The Tory leader has been mired in political chaos since he took office in late July, having lost his majority, sacked 21 MPs and seen his own brother walk out of the government.
Yet the poll of 2,103 people by BritainThinks, a research and strategy consultancy, suggests that Mr Johnson enjoys much stronger support than the leader of the Labour party. Some 30 per cent of those polled preferred the Tory leader as prime minister, compared with 14 per cent for Mr Corbyn.
However, 34 per cent of those polled said they did not know who would make the best leader — a bigger proportion than supported either Mr Johnson or Mr Corbyn.
MP group urges transparency in picking next BoE governor
A group of MPs have urged the chancellor to publish a shortlist of candidates for the job of central bank governor.
Twenty-eight MPs, headed by Catherine West, have written to Sajid Javid to request more transparency in the process that will pick the successor at the Bank of England to Mark Carney, who is due to step down in January, for the next eight years.
The letter says:
It is crucial that the appointment of the net governor is made on merit, not narrow political expediency.
At a time of such political uncertainty, it is inadequate to allow this decision to b emade by the chancellor behind closed doors.
“We the undersigned therefore urge the Treasury to increase transparency by providing us with a public shortlist of candidates who have been shortlisted for the position of Bank of England governor,” said Catherine West, backed by a cross-party list of MPs who include Ian Blackford, Sarah Wollaston, Stephen Kinnock, Angela Smith, Caroline Lucas and Margaret Hodge.
UK gilts fall after economy shows growth in July
The yield on the 10-year government bond rose following a report that showed a greater than expected increase in gross domestic product in July, easing fears that the economy was heading towards recession.
The yield on the benchmark gilt climbed about 5 basis points to 0.553 per cent early Monday, according to Refinitiv data. Yields move inversely to prices. The report helped boost sterling, which was recently up 0.5 per cent against the dollar. It rose 0.4 per cent against the euro.
The services industry, which makes up about 80 per cent of the economy, returned to growth with a 0.3 per cent rise from the previous month, the Office for National Statistics reported on Monday.
GDP had shrunk in the second quarter, raising concern over a looming recession for the economy. Recession is defined as two consecutive quarters of contraction.
Leo Varadkar tells Boris Johnson: ‘No backstop is no deal’
The Irish prime minister insisted on Monday that without a backstop to prevent a hard border on the island Ireland, there would be “no deal” on Brexit.
Leo Varadkar said: “No backstop is no deal”. His remarks directly counter UK prime minister Boris Johnson, who has said the backstop negotiated by his predecessor Theresa May would not stand because it risks locking the UK into EU laws.
Mr Varadkar claimed that the UK has still not proposed a legal, operative alternative to the backstop. The taoiseach also warned, “if there is no deal, it will cause severe disruption for British and Irish people alike”.
Additional reporting by the FT’s Edwin Esosa.
Pound rebounds as Johnson meets Varadkar in Dublin
Sterling extended its gains as Boris Johnson met his Irish counterpart Leo Varadkar in Dublin and insisted he wants a deal.
The currency rebounded off earlier losses with a 0.3 per cent rise against the dollar. It rose as high as $1.2320 and was recently trading at $1.2312. It had earlier dropped to as low as $1.2235 against the dollar. Against the euro it was up 0.2 per cent.
Johnson reiterates he wants to get a deal for the UK to leave EU
Boris Johnson, meeting his Irish counterpart in Dublin, says he thinks a deal is possible, though adds that negotiations have been going on too long.
He acknowledged the “complexities” with the border issue, adding that “we can ensure unchecked movement of goods and people”.
Mr Johnson said: “The UK could get through no-deal but it would be failure.”
With “sufficient energy and a spirit of compromise can fix this,” he said. “I want to get a deal.”
Leo Varadkar says ‘stakes are high’ in talks with Johnson
Irish prime minister Leo Varadkar has said the “stakes are high” as he prepares to meet his UK counterpart Boris Johnson.
The taoiseach said on Twitter:
British Prime Minister @BorisJohnson has arrived at Govt Buildings. We’ll be talking #Brexit. The stakes are high. Avoiding the return of a hard border on this island and protecting our place in the single market are the Irish Government’s priorities in all circumstances.
UK GDP for July better than expected
UK economic growth for July was more than expected as estimated gross domestic product for the month was up 0.3 per cent, better than the 0.1 per cent forecast in a Reuters poll. That’s better than the no change from the previous month.
From July 2018, GDP rose 1 per cent.
The pound reversed early losses against the dollar to rise 0.1 per cent at $1.2295. Against the euro it was €1.1141, up 0.04 per cent.
Rob Kent-Smith, head of GDP at the Office for National Statistics, said: “GDP growth was flat in the latest three months, with falls in construction and manufacturing.
While the largest part of the economy, the services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019.
The trade deficit narrowed due to falling imports, particularly unspecified goods (including non-monetary gold), chemicals and road vehicles in the three months to July.”
Science and tech to power UK growth over next 20 years, report shows
Science, technology and healthcare will power economic growth in the UK after it has left the EU, according to a report from BNP Paribas. The report, which uses gross value added and employment levels for its forecast carried out by Cebr, says the scientific, professional and support services industries will more than double in size over the next two decades and will have 25 per cent increase in employment. This will mean the sector becomes the biggest in the economy by 2038 and will be worth £560bn, BNP Paribas said the report showed.
Transport, storage and communications will have the second-fastest economic growth in the period, with 92 per cent increase, and will be worth £451bn by then to become the second largest industry. The sector will add 900,000 jobs in the next 20 years, the report said.
Anne Marie Verstraeten, UK country head, BNP Paribas Group, said:
Over the next 20 years, the environment and technology will increasingly be the catalysts of change for all sectors of the UK economy. Such change inevitably breeds challenge, but it also triggers real opportunities for UK PLC to put its leadership position and creativity in these two areas to work, and, in so doing, create sustainable growth and new jobs.
On today’s docket…
The House of Commons is to begin sitting today at 14.30 London time.
The full agenda is listed below, but a few highlights via Jim Pickard:
-Debate on the Northern Ireland Act (part of a bid by Dominic Grieve to thwart a no-deal Brexit). Julian Smith threatened to quit last week unless Boris Johnson agreed to emergency laws to protect Northern Ireland after no-deal. This may be raised.
-Mr Johnson is also set to attempt for a second time to call snap elections. Without the backing of opposition parties, the prime minister is expected to fail.
-The PM is also set to suspend parliament this evening.
Sterling under further pressure
The pound is down against both the US dollar and the euro as London dealings pick up steam.
Sterling is currently down 0.3 per cent against the buck at $1.2247, and by 0.4 per cent against the common currency at €1.1098.
The fall comes ahead of what is expected to be another frenetic week in UK politics. Later today, Boris Johnson is poised to push, for a second time, for snap elections. But analysts reckon his bid will ultimately fail.
His government is under sharper pressure after Amber Rudd, seen as a centrist within the Conservative party, quit in protest of the government’s recent actions.
Former minister Rory Stewart ‘very confident’ MPs can stop no-deal Brexit
Former international development secretary Rory Stewart said he is “very very confident” that MPs can stop a no-deal Brexit.
“I remain very very confident that we can stop no-deal,” he told Radio 4’s Today‘s programme. Until recently, “the formal policy of the cabinet was to avoid a no-deal which was why extensions were put in place and why we were focusing on negotiating a deal”, Mr Stewart said, who was a candidate in the race for Tory leadership that Boris Johnson won in July.
“We signed up for an orderly exit, we got a good deal,” he said. Mr Stewart was one of the 21 MPs who was suspended from the party last week.
He does believe there are other unhappy cabinet members: “Everybody, particularly who was in the cabinet with me and Amber under Theresa May’s government, was very aware of the dangers of a no-deal Brexit.”
He added: “I believe that what we should be doing is to make the positive case to return the Conservative party to the centre ground.”
Sterling slips: Morning read from currency analysts
The pound is down a tad this morning, just below the $1.23 level, as analysts remain uncertain over the path of UK politics and the shape Brexit may eventually take.
Here is a round-up of what a handful of analysts are saying:
Evidence that we might avoid a no-deal Brexit on 31 October with a possible three-month delay is offering some relief to sterling across the board. Still, the risk of a possible snap election in the UK in the autumn is still acting as a brake against a complete turnaround in sentiment in the GBP’s favor, leaving GBP-USD capped above 1.23 and EUR-GBP resilient below the 0.90 baseline.
A dramatic week in UK politics has narrowed the path to a “no deal” Brexit, skewing near-term risks to Sterling to the upside.
First, Parliament passed legislation forcing the government to request a Brexit extension should it fail to reach a deal with EU negotiators. Second, a group of opposition parties has reportedly agreed to thwart the Conservative government’s efforts to force a general election before an extension has been secured.
We think the net effect significantly lowers the odds of a “no deal” outcome next month. However, beyond October we believe the odds of a general election remain high, and we are sufficiently unsure about PM Johnson’s likely strategy over the coming weeks to recommend new longs at this stage. But we think the possibility that the PM backs away from demands for an early election and pivots to some type of revised deal (e.g. one which replaces the controversial backstop with other arrangements acceptable to Brussels) might be underpriced in GBP.
Political dynamics in the UK adds fresh uncertainty to both the near- and long-term outlook for GBP. We think the probability of no-deal Brexit on Halloween has gone down, lowering cumulative probability of no-deal.
However, we believe it is premature to remove it as our base case given the still large potential of that outcome. In the interim, we expect that GBP value will reflect two opposing forces of rising “option value” of the GBP as the probability of delayed Brexit has risen versus an increasing discount for uncertainty over the direction of UK policy as an election becomes near certain.
We are not changing our GBP forecasts as no-deal Brexit still remains a significant probability, but the risks clearly have skewed towards the post-Brexit lows we forecast occurring in Q1 20 rather than Q4 19. In the near term, we think the GBP’s, largely position-driven ascent, will likely run out of steam, skewing risks to the downside for the pound.