UK: Focus on the political turmoil – Danske Bank

Danske Bank analysts suggest that markets will focus on the political turmoil in the UK on the debate of a general election after the EU agreed to (yet another) extension until 31 January next year. 

Key Quotes

“Yesterday the EU agreed to a Brexit delay of up to three months accepting the UK's request for a flexible extension of Brexit until 31 January 2020 (we have been calling for another extension since April). If no EU country objects within 24 hours - by Tuesday afternoon - the delay will have been formally adopted. The EU27 agreement on the Brexit extension was reached after talks over the weekend to get France's support, as President Emmanuel Macron opposed any attempts by the EU to gather countries behind a Brexit delay to 31 January.”

“In the UK, the House of Commons once again rejected PM Johnson's call for a general election but he may be more lucky today, as both LibDem and SNP have sounded positive supporting his call for a December election (although he meets some opposition within his own party, as some think it is better to try to force the Withdrawal Agreement Bill through Parliament, as they fear losing a potential election). Unfortunately, it is very difficult to predict the outcome of UK elections due to the voting system, despite the big Conservative lead at the moment.”

“A potential plan B for the UK government is to pass a new one-line bill amending the FTPA to set the date for the next election on 9 December (supported by LibDems and SNP). This would only require a simple majority but the drawback is that such a motion is amendable (i.e. a majority can add conditions like votes for 16-years olds, votes for EU citizens etc.).”