What is Prime Minister May's Plan B?

The plan B that British Prime Minister Theresa May has for Brexit is suspiciously similar to plan A that was voted down last week without a chance. The coming days will show whether the British House of Commons has better ideas. Meanwhile, the British pound is slowly recovering.

On Monday, January 21, May was given an excellent opportunity to steer her country towards an orderly exit from the European Union (EU). Instead, she just promised to make some changes to her deal, which was completed less than a week ago voted out in the House of Commons (432 votes against and 202 votes in favour).

It evokes the comparison of a restaurant guest who returns a dirty meal, only to be presented with exactly the same plate a little later. However, anyone who thinks that the financial markets will react disappointedly will be disappointed. The pound shot up nearly 21% over the course of the day on Monday, January 1.

hope for a delay
The gain of the coin is less strange than it seems. After May's speech, who previously stated that she actually has no plan B, it is now the British House of Commons' turn. Parliamentarians will have the opportunity to submit proposals themselves in the coming days. One of the most promising motions is the collaboration between Labor MP Yvette Cooper and conservative Nick Boles.

Although the parties of these politicians are diametrically opposed in many areas, the duo wants to jointly table an amendment to extend the negotiation period with the EU. This could prevent Great Britain from turning its back on Europe on March 29, 2019 without proper agreements. In their eyes, the national interest now weighs just as much more than the party interest.

Save those who can save themselves
May would prefer to postpone Brexit until all points are agreed, but that leads to an uprising among the Brexiteers in her party. A promising option is to set a firm deadline for the talks with the EU. Above all, this remains the border a hot topic between Ireland and Northern Ireland. However, the EU is reluctant to commit itself to such matters; certainly as long as the risk of a hard Brexit is not removed.

In addition, it is expected that the consultations between May and the EU will yield little. It also remains to be seen whether the amendment by Cooper and Boles will win a majority. Otherwise, the clock will keep ticking towards March 29. If May wants to avoid both a hard Brexit and a second referendum, she will have to put a lot of water into the wine. In the meantime, the British pound has another wild ride ahead.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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