May Risks New Defeat Over Brexit as Tory Rebels and Labour Unite

(Bloomberg) -- Prime Minister Theresa May risks defeat over her Brexit policy in the House of Commons after the opposition Labour party decided to back an amendment penned by pro-European lawmakers in her own Conservative party.

The latest flashpoint, bringing together the opposition and Tory rebels, is over an attempt to tie May’s hands by forcing her to sign up to a customs union if she fails to get a deal that would allow free and easy trade between the European Union and the U.K. by early 2019.

The opposition Labour Party will whip its lawmakers to back that amendment when it is debated on Tuesday in the lower chamber. The vote stands on a knife edge a day after May survived a vote in Parliament on Monday by a margin of just three.

All this has become a proxy war between various factions in May’s deeply divided party, with Labour seeking to exploit her lack of majority in Parliament to topple her government. While a defeat on Tuesday would not spell May’s end, it would be another uncomfortable reminder of her weakness and could make her position more precarious.

The pound snapped three days of gains to weaken as much as 0.7 percent against the dollar.
“There is anticipation that the government may well be defeated this evening,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd.

Markets are showing signs of nervousness as there are growing signs that May’s hard-won Brexit policy could be thrown into disarray.

She survived Monday’s votes -- where she was forced to accept amendments from Brexit hardliners -- because of absentees including Liberal Democrat Leader Vince Cable and his predecessor Tim Farron, but on Tuesday, she may not be so lucky: The rebels already proved in December they’re capable of defeating the government.

©2018 Bloomberg L.P.