Theresa May’s Brexit Steeplechase Has Only Just Begun: an Investor’s Perspective

UK Prime Minister Theresa May has cleared the first hurdle in her bid to secure a soft Brexit. Her Cabinet has backed the withdrawal deal UK and European Union negotiators have agreed to. But David Zahn, Franklin Templeton’s head of European Fixed Income, warns her most difficult challenge lies ahead. And he believes there remain plenty of obstacles in her path, with profound implications for investors.

The UK government has largely come together behind a European Union (EU) withdrawal deal UK and EU negotiators have agreed to.

But UK Prime Minister Theresa May faces an uphill struggle to get the deal through parliament. As a result, we expect uncertainty and volatility in UK and European financial markets for some months.

Opposition among May’s Supporters

Certain parts of May’s Conservative Party will not support this deal, because of its provisions for remaining within the European Customs Union.

The planned status of the Northern Irish border with Ireland is also likely to be contentious for some members of parliament (MPs), including those from Northern Ireland’s Democratic Unionist Party (DUP).

As May relies on the DUP for her working majority in the House of Commons, their dissent could pose a problem for her. The government may need to reach across the aisle and draw support from opposition MPs.

Both sides of the political divide in the United Kingdom have said they want to respect the referendum outcome and there could be a number of Labour MPs in particular willing to support this deal.