Parliament Votes Nay on Brexit, and Pound Continues to Drop

The UK parliament has again defeated Prime Minister Theresa May, deciding on a no-deal Brexit, and the British pound slid some more.

After Tuesday’s debate, marked by an unusual level of booing, the House of Commons voted 391-242 against an agreement. The pound slid a hair more, in keeping with its long descent, down 6% from a year ago.

Dubbed a “polished turd” by MP Steve Double, the question before the lawmakers was another in a series of disappointments for the May government as it tried to negotiate Britain’s departure from the European Union (EU).

Double argued that there had been many attempts to “undermine” May’s negotiations with the EU, resulting in an “impossible situation” between no-deal and a bad one. “The fact that we are where we are today is a failure of our politics and a failure of our leadership.”

After a series of delays and various divorce proposals, May had hoped that 11^th-hour approvals from the EU on the Irish border’s status would result in a breakthrough. It didn’t.

“I profoundly regret the decision that this house has made tonight,” said May, her voice cracking and hoarse. “This is an issue of grave importance for the future of our country.”

“Quite clearly, ‘no-deal’ has to come off the table,” said Labour Party leader Jeremy Corbyn following the court’s decision, suggesting that “perhaps there should be a General Election” so the people could choose “who their government should be.”

Parliament will reconvene on Wednesday to determine if the UK will leave the EU with no plan on March 29. If the House of Commons again rejects May’s plan, it will then determine a vote on extending Brexit.

“Voting against leaving without a deal and for an extension does not solve the problems that we face,” May said, adding that the EU “will want to know what use we want to make of that extension,” putting the answer on the House.

Andrew Wilson, CEO of Goldman Sachs Asset Management’s Europe, Middle East, and Asia division, told CIO the firm expects the British pound to “weaken further amid prolonged uncertainty,” but a reversal of Tuesday’s vote “could provide some support for the currency.”  

He said the central expectation was—and still is— that the UK would eventually split from the EU. ”However, we recognize that the timeline for such an outcome is fluid, particularly given the EU is unlikely to accept either a time limit on the Irish backstop or a unilateral UK exit mechanism from the customs arrangements it enforces,” he said.

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