FTSE and sterling jump on Brexit vote delay
The UK’s blue-chip index was up 49 points at 7,234 at 3.55pm, which represents a 0.7% rise on the day.
This followed Thursday’s vote in the House of Commons in which MPs approved a motion requesting that prime minister Theresa May asks European Union (EU) leaders for a one-off extension to Brexit. MPs voted by 413 to 202, representing a majority of 211 votes.
The news caused the pound to strengthen against the dollar to $1.328.
Chris Rodgers, senior fund manager at Sanlam Investments, said the vote in favour of delaying Brexit has reduced the possibility of a no-deal Brexit. Nevertheless, he said overseas investors continue to remain on the side-lines.
“The fundamentals of the UK do, however, remain strong, and we expect an immediate boost to UK equities and sterling once the Brexit outcome is made clear. In the meantime, investors may wish to consider their exposure to domestically-focused UK equities which in some cases may be considerably undervalued,” he explained.
MPs will be able to vote on a third version of May’s Brexit deal an 20 March. If this is approved, this would mean that only a short extension will be required. If the plan is rejected, a longer delay will be required.
These developments follow an eventful week in the House of Commons, which saw MPs vote against the prime minister’s withdrawal agreement on Tuesday, and then the following day they voted against leaving the EU without a deal.
Although MPs have voted against the prospect of leaving without a deal with the EU, this does not necessarily mean that it will happen. Under Article 50 the UK has legally committed to leaving the EU on 29 March. If a withdrawal agreement is not in place, then ‘no deal’ will be the default scenario.
Plea for a deal
As chancellor Philip Hammond delivered his Spring Statement speech to the House of Commons this week, he made a plea to MPs in the House of Commons to overcome their political differences and reach a compromise by agreeing to leave the EU with a deal over the coming weeks.
“Leaving with ‘no deal’ would mean significant disruption in the short and medium-term – and a smaller, less prosperous economy in the long-term than if we leave with a deal. Higher unemployment, lower wages, higher prices in the shops: that is not what the British people voted for in June 2016,” Hammond said.