Pantheon Macroeconomics - Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.

News | Question of the Week, WC 24th May
Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.

Sorry, but our website is best viewed on a device with a screen width greater than 320px. You can contact us at:

Question of the Week, WC 20th May

Q: Is a no-deal Brexit more likely now Prime Minister May has stepped down?

A: Theresa May has announced her intention to stand down on Friday, June 7, and the resulting Conservative party’s leadership contest likely will result in a “true” Brexiteer becoming PM. Little hope remains of a cross-party majority of MPs emerging to implement a soft Brexit before the October 31 deadline. Nonetheless, a no-deal departure, either in October or further ahead, remains unlikely. Changing the leader won’t alter the maths in parliament. A new PM might be more willing to attempt a no-deal Brexit, but we believe enough sane heads in the Tory party would abstain or vote against the government in a confidence vote—which the Opposition can call at any time—to stop it in its tracks. The Conservative party already has lost four MPs this year; it would take only a further three to defect and actively vote against the government, or six to abstain, in a confidence vote to bring it down.

The new PM might seek to hold an election in the autumn, but it is difficult to see how they would win a majority without a sea-change in public opinion. A new Brexiteer leader would need to win back nearly all of the former Conservative voters who have switched to the Brexit party to replicate the 42% vote share won by Mrs. May in 2017, which wasn’t enough for a majority.  Granted, the threshold for success varies according to how other parties perform; Labour is struggling to maintain support from the broad coalition of Leavers and Remainers that enabled it to win 40% of the vote in 2017 and to prevent the Conservatives from obtaining a majority.  But even if support for Labour remained at its current 28% level seen in opinion polls, uniform national swing models imply that the new Tory leader would have to win back more than half of those who currently are backing the Brexit party.  Even in the plausible best case of a small majority for the new PM, centre-ground Tories opposed to a no-deal Brexit would continue to have considerable influence.

Accordingly, our base case now is that the U.K. remains stuck in its current state of Brexit limbo for at least another year. The necessary political support to make a decisive Brexit step—in any direction—does not exist.  As a result, the U.K. likely will drift towards the current October deadline, and future cliff-edges, before requesting an extension at the last minute.  E.U. leaders will loathe this continual procrastination, but they too have no desire to force Britain out and experience the pain of a no-deal Brexit.

The chart below shows that the Conservatives likely still would fall short of a majority in a new election even if they won back half of those voters who have flocked to the Brexit party and Labour’s vote share remained stuck at 28%. The table shows how we have revised our economic and market forecasts in response to the switch in our base case from a soft Brexit by October to continued paralysis.

Samuel Tombs, Chief U.K. Economist

Pantheon Macroeconomics

To trial our U.K. Service, or any of our other products, please click here

Posted: 24th May 2019

Consistently Right

Access Key Enabled Navigation

Keywords for: News | Question of the Week, WC 24th May

pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent analysis, independent macroeconomic research, independent, analysis, research, economic intelligence, economy, economic, economics, economists, , Ian Shepherdson, financial market, macro research, independent macro research