Brexit Bulletin: Labour’s Remain Dilemma

(Bloomberg) -- Today in Brexit:  As a poll shows Boris Johnson is seen as the only man who can deliver Brexit, the opposition takes a step toward backing Remain. 

What’s Happening?

The Labour party is taking another step toward opposing Brexit, with the trade union chiefs that fund the party and help set its policy deciding Monday to back a second referendum.

Labour members of Parliament who are anti-Brexit now want the party to complete the journey and demand a rerun of the 2016 vote to leave the EU. The party has struggled with its Brexit stance since the result, with its lifelong euroskeptic leader Jeremy Corbyn forced to shift his position repeatedly as he seeks to oppose the government’s plan and appeal to voters across the board. 

Corbyn faces increasing pressure from within his party to take a position, with Shadow Chancellor John McDonnell calling on Labour to “decide early and get on with it.’’ Home affairs spokeswoman and longtime Corbyn ally Diane Abbott said on Twitter that she was “beginning to worry” about the party’s Brexit position. 

If Labour came out in favor of Remain, it would open the door for the party to campaign for Britain to stay in the EU in another referendum. This is seen as the most market-friendly outcome, though the path there could be bumpy. 

Both candidates in the Tory leadership race oppose a second referendum. But with Britain’s parliament rejecting both the proposed EU exit deal and leaving without one, it is seen by some senior politicians as the only way to break the deadlock. 

Today’s Must-Reads

• Veteran anti-Brexit rebel Dominic Grieve has proposed an amendment aimed at blocking a no-deal Brexit. Here's Bloomberg’s Kitty Donaldson and Robert Hutton on how it would work.
• Fund managers are pouring hundreds of thousands of pounds into the Tory leadership campaign, with hedge funds making most of the donations, writes the FT.
• Speculation is mounting over who will be chancellor under the new prime minister, with the names circulating including Sajid Javid, Amber Rudd and even Hunt himself.

Brexit in Brief

Johnson Win| Labour would beat the Conservatives if an election were held tomorrow, but if Johnson was prime minister, the Tories would get a 40-seat majority, according to a new poll by ComRes and the Telegraph. Johnson was seen as best-placed to deliver Brexit by Oct. 31 in the poll, with 64% of the public backing him.

Back Business | Jeremy Hunt has pledged to back business if he becomes prime minister, promising a £27 billion boost to the economy. His five-point plan includes cutting taxes on businesses and a program of infrastructure development. 

Damage Control |  Prime Minister Theresa May moved to contain the diplomatic fallout with the U.S., following the leak of memos written by the U.K.’s ambassador in Washington describing Donald Trump’s administration as “inept.” 

Economic Slowdown | The U.K. economy probably shrank for the first time since 2012 in the second quarter, according to a Bloomberg survey of economists. The survey follows a dismal week of data in the U.K. and warnings from Bank of England Governor Mark Carney that global trade tensions and Brexit had increased downside risks.

Chilling Effect | The U.K. lags behind major peers in bond issuance this year, with Brexit uncertainty and an economic slowdown deterring investment.  The nation’s non-financial companies have cut global bond sales 30% to $37.9 billion. Low interest rates and expectations for further policy easing have stoked sales in countries like Germany. 

Back to Brussels | Brexit Secretary Steve Barclay is in Brussels for talks with chief negotiator Michel Barnier on Tuesday. They're expected to talk about the Irish border backstop, which both candidates have promised to renegotiate.

On the Markets | Pound traders may still be underplaying the risk of a no-deal Brexit. Options covering the Oct. 31 exit date have turned more pessimistic, but there’s room for the risk premium to grow if Johnson is confirmed as prime minister, according to MUFG and Mizuho Bank Ltd.

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To contact the editor responsible for this story: Anne Pollak at apollak@bloomberg.net, Leila Taha

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