Could Brexit Be Dampened by the New UK Prime Minister?

After voting for exiting the EU back in 2016, the United Kingdom is still struggling to find common ground among its political class on how the process will take place. Following three failed attempts to pass through Parliament a negotiated deal with the common block, Theresa May announced her resignation, creating further uncertainty around Brexit.

Johnson and Hunt face off

Since June, the process of selecting the new leader of the Conservative Party had started, as trade.com news has stated, and after several rounds of voting, Jeremy Hunt and Boris Johnson will face a run-off vote. Final results will be released on July 23rd.

A hard Brexit campaigner before the 2016 Referendum and the former Foreign Secretary, Boris Johnson had a tough speech during the last few weeks, promising to get the country out of the European Union on October 31st, with or without a deal.

We will leave the EU on October 31, deal or no deal. The way to get a good deal is to prepare for a no deal.”

Even though he denies he’s aiming for a no-deal deal outcome and despite a more softening speech in the recent days, most of the analysts suggest his main goal was to raise support for his party colleagues. A disorderly Brexit will generate harm both for the UK and the EU, and neither of them wants that to happen.

On the other hand, Jeremy Hunt, the current Foreign Secretary has a more balanced speech when it comes to Brexit, being one of the members who voted three times in favor of the Theresa May’s deal. Same as Boris Johnson, he promises to reopen negotiations with the EU, if elected, as he believes a different deal “is the only solution”.

The EU already expressed its unwillingness to renegotiate, but as we know from the past, the common bloc made concessions many times. Uncertainty is expected to remain elevated until we’ll know who wins the leadership content and until the first meeting with the EU representatives will take place.

With both candidates expressing their desire to renegotiate a deal, the October 31st deadline could be extended even further, until a common ground will be found. Still, a no-deal outcome seems unlikely, but the fractured British politics could continue to pose significant threats to the resolution of the Brexit. In the meantime, we could see further weakness in the pound and a further slowing on the economic activity in the entire European continent.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver