Money managers are becoming increasingly concerned about the prospects of a ‘no-deal Brexit’ between the U.K. and the European Union.
Growing division within both British Prime Minister Theresa May’s Conservative government and the wider parliament is putting investors off.
With less than six months of negotiations left — the U.K. is set to leave the bloc on March 29, 2019 — investors are worried that Britain will depart the EU empty-handed, with businesses unsure about their future and some postponing real investments.
“It is very confusing, we are all very confused. And the thing is, if we are confused and we are paid to look at his, to follow this, then what about investors, what about non-U.K. investors,” Jane Foley, head of forex strategy at Rabobank, told CNBC’s “Squawk Box Europe” on Wednesday. “A huge amount of investors are out of sterling right now.”
The prime minister managed to escape a parliamentary defeat Tuesday, with 307 lawmakers voting against an amendment that would have forced her to negotiate a customs arrangement with the EU if she hadn’t negotiated a trade deal by January 21. May’s victory was a narrow one — 301 parliamentarians voted in favour of the amendment.
The Times newspaper reported Wednesday that May had warned rebel members of her own party that she would call another general election this summer, unless they backed her. Recent opinion polls have suggested that the opposition Labour Party would have strong chances of winning a national election.
Most economists and investors are working on the assumption that there won’t be a leadership challenge or an early election, and that a deal with the EU will be reached. Any changes to this scenario would dent markets.