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Was Theresa May’s strategy doomed to fail?


With Parliament struggling to decide how to deliver Brexit, Prime Minister Theresa May’s leadership is firmly in the spotlight.

But, whether the PM can survive – or get through her preferred Brexit deal – the seeds for her current predicament were sown in the months of negotiations that followed the 2016 referendum.

A timeline from DailyFX shows the key dates in 2017 and 2018 as the deal was devised and negotiated with the EU – and looks at the impact on the Pound, Euro, FTSE100 and bond markets.

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Here’s what we can learn from some of the key dates:

January 2017: Lancaster House

Theresa May’s Lancaster House Speech set out her ‘red lines’ for the negotiations ahead – and set out that she wanted to take the UK out of the single market and customs union and avoid a hard border between Northern Ireland and the Republic of Ireland.

As she did that, GBPUSD traded in a 3.6% weekly range (low-to-high), while the FTSE 100 fell 2.90% in a week.

The Mirror’s deputy political editor Ben Glaze argued that this speech ultimately led to the failure in the Commons in 2019 – setting out competing aims that were impossible to achieve.

April 2017: Snap election

In an apparent bid to strengthen her hand in the Brexit negotiations, May called a snap General Election for June. However, the move backfired and she ended up losing her parliamentary majority and was forced to do a deal with the DUP to form a government.

GBPUSD traded in a 3.12% weekly range (low-to-high) while FTSE 100 fell 3.64% in a week. However, the biggest impact was political. This removed May of her Commons majority – and cut her chances of being able to secure support for the Withdrawal Bill.

September 2017: EU Repeal Bill and Florence

In September, the EU Repeal Bill won its first House of Commons vote. This was the legislation drawn up to unpick the European Communities Act of 1972 and allow the UK to untangle itself from its legislative relationship with the EU.

As a result, GBPUSD traded in a 3.52% weekly range (low-to-high) and FTSE 100 fell 3.35% in a week. The markets were largely unmoved, however, by May’s Florence speech in which she set out plans for a two-year ‘implementation period’ to ensure a smooth exit from the EU. This, now largely referred to as the transition period, set out a further period of negotiations that will be needed if the PM can pass her Withdrawal Agreement.

December 2017: Progress to second phase

Through-the-night talks between May and the EU saw an agreement set in place to let both parties move on to the next phase of talks after ‘sufficient progress’ had been made. The deal vowed for no hard border in Ireland, guaranteed the rights of EU citizens and agreed a ‘divorce bill’. Politically seen as a success, the struggle to agree this early phase was merely a pre-cursor of what was to come and big issues were parked until closer to the cliff edge in 2019.

Still, buoyed by May’s progress, GBPUSD rallied 7.85% over the following six weeks and the FTSE 100 remained stable.

March 2018: Transition period

The EU27 and UK agreed to the dates for the transition period May had called for in Florence. The move raised hopes of an orderly exit – politically and economically – with a year to go.

GBPUSD rallied to a 22-month high of 1.43768 on April 16 before losing 9.87% over the next two months when negotiations then stalled. However, the FTSE 100 rallied 15.53% over the next two months hitting an all-time high of 7,903.

November 2018: Draft Brexit agreement

After October’s summit – previously thought to be key – failed to deliver an agreement, May managed to secure a draft Brexit agreement at an emergency summit in November.

However, any sense of achievement unravelled when figures such as Brexit Secretary Dominic Raab resigned in protest. Amid criticism from both Brexiters and Remainers, the FTSE 100 and bond markets fell and fears of no deal grow.

Politically, May now suffered from never managing to get either side on board with her strategy – and left the EU confused as to what Parliament was actually in favour of or if May was still in control – with votes of confidence following in early 2019.

More than anything, May’s Lancaster House red lines and snap election have framed the Brexit debate in the UK. From there, she’s been left trying to deliver on her own interpretation of Brexit, without necessarily exploring alternatives. Plus, shorn of a Commons majority, she’s lacked the authority to force the issue at key moments.

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