Brexit Bulletin: The Path to Power

(Bloomberg) -- Today in Brexit: As Boris Johnson moves a step closer to power, his supporters are already war-gaming an early election.

What’s Happening?

Boris Johnson has surged further ahead of his rivals in the contest to become the U.K.’s next prime minister.

The former foreign secretary won the backing of 143 Conservative members of Parliament on Wednesday, in a third round of voting that left Foreign Secretary Jeremy Hunt, Environment Secretary Michael Gove and Home Secretary Sajid Javid engaged in the race for a distant second place. Surprise contender Rory Stewart — the only remaining candidate to rule out leaving the European Union without a deal — was eliminated.

The first phase of the contest will come to an end today when the final two rounds of voting among Tory MPs take place, eliminating one candidate each time. Results are expected shortly after 1 p.m. and at about 6 p.m. The two remaining contenders will go head-to-head in a July ballot of 160,000 grassroots party members. 

Still, Johnson may already have his eyes on a bigger contest: His backers are already war-gaming an early election within months of him winning power, Bloomberg's Tim Ross and Robert Hutton report. While Johnson has played down speculation of a snap poll, a vote in the autumn would be an option if he wins, according to people familiar with the matter.

Such a move could prove popular with at least one Tory. Chancellor Philip Hammond is due to use his annual Mansion House speech today to urge the leadership contenders to consider holding a general election or a second referendum in order to break the Brexit impasse, rather than an economically damaging no-deal exit from the EU.

“If the new Prime Minister cannot end the deadlock in Parliament, then he will have to explore other democratic mechanisms to break the impasse,” Hammond will say, according to advance comments released by the Treasury. “Because if he fails, his job will be on the line — and so, too, will the jobs and prosperity of millions of our fellow citizens.”

Today’s Must-Reads

• Johnson’s supporters are plotting to prevent Gove from reaching the final two of the Tory leadership contest, the Telegraph reports.
• As the race to replace her continues in the U.K., Theresa May is making what could be her final trip to Brussels for an EU summit. Brexit is unlikely to figure highly on the agenda, although the meeting could have some impact on the U.K.’s future, with leaders set to debate who should take some of Europe’s top jobs.
• The Bank of England will announce its latest policy decision at noon today. Traders are increasingly concerned that the central bank’s assumption of a smooth Brexit process is too optimistic.

Brexit in Brief

It’s a Challenge | In an LBC interview Wednesday, Hunt said it’ll be “very challenging” to get the required changes to the Brexit deal by Oct. 31, an admission that may draw criticism from Brexiteers.

Davidson Backing | Scottish Tory leader Ruth Davidson, a longstanding critic of Johnson, says she would nonetheless campaign for him in an election if he takes the top job, according to the Telegraph.

Alternative Arrangements | The government has set up the first of three planned panels to help devise a replacement for the Irish backstop in the U.K.’s withdrawal deal, the Brexit Department said today. The panels aim to find an alternative to the backstop, aimed at preventing the need for infrastructure and visible checks on the frontier with Ireland, by 2020.

Labour Choices | Opposition Labour leader Jeremy Corbyn told his shadow cabinet on Wednesday that any Brexit deal should be put to a public vote, with options for both sides of the argument. That came on the day more than 25 Labour MPs wrote to Corbyn urging him not to go “full Remain.”

Brexit Shutdown | A Confederation of British Industry survey Wednesday showed U.K. manufacturing output ground to a near halt in the second quarter as carmakers halted production amid uncertainty over the eventual date of Brexit.

Postponing Moves | Goldman Sachs and Standard Chartered are among global firms postponing the transfer of several billion euros of capital outside the U.K. despite regulatory pressure to complete the move, Bloomberg’s Stefania Spezzati, Steven Arons and Luca Casiraghi report.

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

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