The pound bounced Tuesday after Prime Minister Boris Johnson again failed to get MPs to back a snap election.
Just before Westminster lawmakers broke up for five weeks they inflicted yet another defeat on the new premier, who has been thwarted in his attempts to call an early poll as he looks to win a majority in parliament and push through a no-deal Brexit.
MPs had earlier also voted to demand the government publish confidential documents about Britain’s readiness to leave the European Union on October 31 without a divorce deal.
The latest defeat on calling an election saw the pound – which had been slipping through Monday – rally more than one percent against the dollar from as low as $1.2234 to as much as $1.2385, its highest level since the end of July. Data showing the British economy faring better than expected also provided support to the sterling.
Johnson insists he will not ask for a delay to the October 31 Brexit date, despite MPs passing a bill that could force him to do so if he fails to reach an agreement with the EU.
London’s financial district would recover in the long run from a no-deal Brexit despite facing initial “shocks and disruptions”, the head of the City, Catherine McGuinness, said on Monday.
“I do think … a ‘no-deal’ Brexit cliff-edge risk has the potential to cause shocks and disruptions but I think it is less serious than it was initially because of the preparation made,” she told a press briefing.
“We will find a way of muddling through because of planning but there will be disruptions,” said McGuinness, policy chair at the City of London Corporation, the local government authority for the capital’s powerful financial district.
“I am very confident about London’s future and the UK’s financial sector,” she added, pointing to strong growth for the capital’s “fintech” and “green” finance sectors.
And McGuinness noted that the “UK financial sector is possibly further advanced than other sectors because it started planning as soon as the referendum” in favor of leaving the EU in 2016.
Around 5,000 finance jobs could have been moved from the UK by the time the country departs the European Union, irrespective of whether a deal is struck, she said.
Banks that have announced plans to relocate jobs abroad include JP Morgan Chase, UBS and HSBC.
According to a recent survey by financial group EY, British financial services firms have disclosed £1.3 billion ($1.6 billion, 1.45 billion euros) in costs for relocations, legal advice, and contingency provisions.
In addition, they have put aside £2.6 billion for capital injections into new non-UK headquarters.
Now that MPs have rejected Johnson’s second bid to call an early election to solve the Brexit impasse, he is left in limbo heading towards a crucial EU summit next month, just days before Britain’s scheduled exit.
Here are some possible scenarios for the coming weeks:
Britain will leave the European Union on October 31 unless it asks the bloc to delay, and the leaders of the other 27 member states agree.
Johnson wants to keep this date, but many MPs fear his threat to leave without agreeing divorce terms with Brussels would cause huge disruption.
In the past week, they have passed a law that would force Johnson to request a three-month delay to Brexit to January 31, 2020, with the option of further delays.
This would take effect if the prime minister has failed to get a divorce deal or somehow persuaded MPs to back a “no deal” exit by October 19.
Johnson could still keep to the October 31 deadline if he manages to secure a deal with the EU that wins the approval of a majority of MPs – but it is a huge task.
His predecessor, Theresa May, reached an agreement with Brussels last year but MPs rejected it three times.
EU leaders have so far refused to reopen the text, and accuse Johnson’s government of failing to come up with any concrete alternative plans.
Johnson had hoped his threat to walk away without a deal would persuade them to renegotiate, and says MPs’ actions have undermined his strategy.
However, he says he believes an agreement is still possible before a summit of EU leaders in Brussels on October 17-18, in time to leave on October 31.
‘No deal’ Brexit
Johnson has said he would rather be “dead in a ditch” than delay Brexit, more than three years after Britons voted in a referendum to leave the EU.
His government has indicated it will look for loopholes in the MPs’ legislation in order to allow a “no deal” exit, although it insists it always upholds the law.
There is speculation Johnson could resign rather than ask for a delay, but someone – perhaps a civil servant, or an opposition politician – would have to make the request.
There is a chance EU leaders tire of Britain’s prevarication and refuse to delay Brexit, although the bloc is unwilling to take the blame for a disorderly divorce.
After expelling 21 of his Conservative MPs who rebelled over the Brexit law last week, Johnson no longer has a majority in the 650-seat House of Commons.
This leaves him in an impossible situation, unable to govern, and an election is seen as almost inevitable.
But the timing remains in question.
Johnson had wanted an election on October 15, hoping he would win enough seats in the Commons to force through his Brexit plan.
But the main opposition Labour party said it would only back an election once “no deal” was off the table.
Two-thirds of MPs must support an early election, but parliament is now suspended until October 14.
Talk is now turning to a November poll.
No Brexit at all?
If Johnson wins a subsequent election, or can forge a pact with the eurosceptic Brexit Party, he could still force through a “no deal” divorce in the months ahead.
If Labour wins, the party has promised to hold a new referendum, with an option to remain in the European Union – which could see Brexit cancelled.