Brexit day 14: 'Michael doesn't mind taking a good thrashing from Theresa'

Conservative leadership: May and Leadsom go forward. Anything could happen in the membership vote.

The results are in from the second – and final – round of MP voting and as expected the result is a very handsome win for Mrs May.

2nd Round Votes:
Theresa May: 199 (60.5%)
Andrea Leadsom: 84 (25.5%)
Michael Gove: 46 (14.0%)
Stephen Crabb: OUT
Liam Fox: OUT

Michael Gove has been eliminated and May and Leadsom will now – barring some new travesty – go forward to the membership vote. It’s one member, one vote and you must have been a party member for 3 months to qualify. This means the Conservative party is on the verge of electing its second woman leader, and the nation’s second woman PM. Graham Brady MP, Chair of the 1922 Committee, confirmed that we will know the result on 9th September.

What next? Theresa May remains the favourite to win. However, there are absolutely no guarantees about how the membership will vote. Leadsom will push the buttons of a lot of traditional Tories: a leave voter, socially Conservative and promising to put issues like fox hunting back on the table. This adds a frisson of unpredictability to events. The choice of our future PM is now in the hands of perhaps 100,000 members of the Conservative party. A clear reminder that we live in a Parliamentary system, despite appearances to the contrary.

Tactical voting: Boles caught out

I mentioned that a stop Leadsom effort would likely be put into play by Team Gove. It reached its apotheosis (or nadir depending how you look at it) with Gove campaign leader Nick Boles’ message to May supporters which emerged yesterday evening . The Westminster village went bananas for the Sam Coates scoop:

I don’t need to interpret the message for you. But I will anyway:

From Nick Boles: You may not trust Michael Gove as far as you can throw him. And I completely understand why you are backing May. But if Leadsom wins we are in trouble. Look, Theresa is probably going to win. But we all know the half the members are bonkers and they might just vote for Leadsom. They voted for IDS and for goodness sake, and look where that ended up! I know you probably don’t want to talk to me and think this is desperate stuff. But think about it. Do you really want to live in a country run by Leadsom? Do you really want to serve in her government? As a sweetener Gove is going to be thrashed publically by May for two months and who won’t enjoy watching that? Just think about it OK?

The effort was spectacularly unsuccessful and apparently went down extremely poorly with MPs. Why did Boles send the message knowing that it would be leaked and could backfire? Possibly a last ditch effort, attempting to capitalise on the questions have been asked about Leadsom in recent days – in particular in relation to claims made in her CV. Leadsom fought back today saying the claims were ridiculous and gave an interview to BBC’s Laura K today to try to set the record straight. As a side note, the glare of scrutiny on Leadsom’s background is only going to get brighter in the weeks ahead.

Labour leadership

Owen Smith, indicated that he is a potential  contender for the leadership in fabulously passive-aggressive statement today. It left all options open – from putting up a challenge all the way through to capitulation to Corbyn.  

It is clear Smith is considering his options, as he has spoken to both Len McCluskey of Unite and Jeremy Corbyn ‘to explore could be done to prevent a split in the party’. McCluskey told Smith that talks between Corbyn and Tom Watson had been ‘productive’ and would go on into the  weekend. Corbyn told Smith that he is engaging in talks ‘with an open mind’. This means the square root of nothing.  

This cannot go on forever, despite the call from Len McCluskey to allow more time. So we ought now to be asking the question: is the coup failing? The longer Corbyn is dug in, the harder it is to depose him. He has already sat tight for pretty much two weeks, knowing that party rules protect him. And if he doesn’t want to go, who is going to make him?

UKIP leadership

What fun! Another leadership contest in which the putative candidates are trashing each other. This time its Nuttall and Woolfe.  I can’t bring myself to spend to many words on UKIP so will let Guido keep you up to date. PS there’s also a row about whether to allow suspended Suzanne Evans to stand.

Future relationship with the EU

Foreign Secretary Philip Hammond gave evidence to the Foreign Affairs Select Committee today. The rights of EU citizens resident in the UK continues to exercise MPs – particularly leavers, bizarrely - and many want the government to give a unilateral guarantee of the status of EU nationals already resident here. The government is not offering guarantees, saying it can’t until reciprocity on the status of UK nationals living on the continent is offered by EU governments. In evidence, Hammond said that he would try to address the issue informally with EU ministers on Sunday but rather tartly pointed out that the EU had said there would be no informal discussion before Article 50 had been triggered. However, the prospect that these issues will not be discussed at an intergovernmental level in advance of Article 50 seems absurd to me.

Machinery of Government

 If I’ve heard it once, I’ve heard it a hundred times in the last day or so. Why didn’t the Government do any contingency planning for a Brexit? It’s a good question, and for the most part it has been posed by proponents of Leave who seem irritated that there isn’t an oven-ready plan for Brexit. Philip Hammond told the Select Committee that this was because the Government did not want the plans to leak and therefore influence the campaign. However, there is a corollary of this question which is why arch Euro-sceptics, who have wanted this day for twenty years or more, had not spent time thinking about what the UK outside the EU might look like.  

Companies and markets: banking special

Chancellor George Osborne and leaders of international investment banks released a statement on London as a world leading financial centre. Signatories said: “Britain’s decision to leave the EU clearly presents economic challenges which we are determined to work together to meet”.  Further, they agree to “work together to identify the new opportunities that may now become available so that Britain remains one of the most attractive places in the world to do business” and “to help London retain its position as the leading international financial centre”. It was signed by the Chancellor, JP Morgan, Goldman Sachs, BAML, Standard Chartered, Morgan Stanley and Citi.  

However, what is at stake was spelled out by JP Morgan Chase chief Jamie Dimon who said that the firm may move several thousand jobs from Britain if the country loses the financial services passport. He said “If we have that passport after Brexit, we likely would not have to make any change at all…But I think the European Union will not accept that. It will put more conditions on the U.K. and might force banks to become smaller in London.” J.P. Morgan employs 16,000 people across the U.K. That’s going to be an internal comms challenge!

I have been watching the Italian banking issue for a few days now as it is another  issue bubbling away but over on the sunnier side of the EU. It looks a bit grim to me so I have been trying to look at coverage from outside the UK, to ensure that it isn’t unduly coloured by our own domestic fixation on Brexit. I turned to New York Times DealBook, which provides an excellent explanation of the problem and its potential solutions. The NYT says Italian banks need about $45 billion to shore them up if they write down the value of bad loans they are carrying. The Italian government’s solution is ostensibly simple – a taxpayer bailout to prop up the banks. However, post-crisis Eurozone rules bar such bailouts and insist that investors should take the hit, by converting their debt into less valuable equity (this is known as a bail-in). This is a logical step as it is supposed to stop taxpayers having to bail out banks and therefore to prevent moral hazard in the banking system. The problem is that in Italy most of the investors who take losses are ordinary retail punters – i.e. Joe Bloggs. This creates a risk that could then ripple into the wider economy. This sets up an impasse which has pitted Matteo Renzi against Angela Merkel. A deal is possible, but it looks like Italy’s banking sector is facing considerable upheaval in the months ahead.  

The stock price of Banca Monte dei Paschi di Siena is down 80 percent in the last 12 months

Tweet of the day

 Tim Loughton MP leads the revolution (follow the link to watch the video)

 This reminds me of the old joke about Conservatives:What do we want? Gradual change! When do we want it? In due course! 

Brexit day 13: "We may pride ourselves on being a back-of-the-envelope nation, but this was excessive"

The news agenda today was led by Sir John Chilcot’s inquiry into the Iraq War. A report of huge depth and detail, it provides a forensic analysis of repeated errors in policymaking and weaknesses in process  in the lead up to the invasion of Iraq and during the occupation. The BBC nutshells the findings here. Today’s issue is therefore shorter than usual.  

Conservative leadership

Then there were three. Fox was eliminated in the vote and Crabb withdrew shortly afterwards. Both put their support behind May who is now screaming into the lead in the Parliamentary party. Unless there are further withdrawals from the contest, the final two runners will be known on after the second round of voting on Thursday evening. The candidate with the least votes will be knocked out and the final two will go to the membership.    

However, the possibility of a coronation of Theresa May has been kicking around over the last day or two. A coronation would entail May being elected leader without having to face a vote in the membership. How could this happen? Just thinking aloud here:

• Both Leadsom and Gove withdraw before Thursday’s ballot, leaving May the only candidate standing (feels unlikely to me but in these strange times, who knows?)
• Gove beats Leadsom on Thursday and then withdraws before the membership ballot in an act of martyrdom (that would need some heavy duty ‘stop Leadsom’ tactical voting)
• Leadsom beats Gove and then withdraws before the membership ballot (perhaps because of the unhelpful stories about her CV, her blog postings, her tax affairs and her ‘UKIP links’ floating around)

May has said she doesn’t want a coronation, and one could argue that the personal mandate that comes from a full membership ballot is pretty valuable for a ‘unity’ candidate. But a colleague points out that she could hardly say the opposite! If a coronation does come to pass, then what? Theresa May would elected leader of the Conservative party, and constitutionally would be able to assume the premiership very quickly. Like in days.

If it isn’t a coronation, another question being posed is: why is the process going to run on for the best part of a further two months if we will know the final two by Thursday evening? Good question. We should probably just get on with it, get the new PM in and get to work instead of drifting for weeks.

Labour leadership

Nothing substantive to report today – including from Tom Watson’s ‘last roll of the dice’ meeting with union bosses yesterday. A former Labour leader seems to have been more in the spotlight. Jeremy Corbyn apologised on behalf of his party for the Iraq War. Tony Blair said he would do the same again.

Trading places

All 28 member state parliaments will get a vote on the Canadian/Europe trade deal known as CETA. While some deals have been fast-tracked in the past, member state governments are increasingly sensitive to the anti-trade sentiment bubbling up around Europe. As such the deal will have to be signed-off national parliaments, in an attempt to address what critics say is the secretive and undemocratic process of negotiating trade deals. Trade Commissioner Malstrom said: “We call upon the member states, who have all asked for this agreement, who have all welcomed it, to also show the leadership to defend it vis-a-vis their parliaments and their citizens…This is a really good agreement.” Brussels watchers say the deal is highly likely to succeed, if on a slower timetable.

An interesting – and provocative - view from Terence Corcoran in Canada’s Financial Post: ‘After days of ritual condemnation of Little England as a bigoted anti-globalization nation, CETA offers a handy reminder of the existence of Little Europe. When it comes to globalization, free trade and the movement of investment and people, every nation — not just Britain — finds reasons to impose limits.’ The first point part of Corcoran’s quote is OTT – he is a columnist after all - but the second part points to a major trend of our time, namely that the benefits of globalisation are increasingly contested.

Companies and markets

Yesterday I was bemoaning the weak pound, and I am today too. That’s largely because, as I’ve mentioned before, the dollar/sterling exchange rate directly impacts the cost of our holiday to the US in September. Whether I will have to get a slightly smaller steak for dinner or drink the house red, of course, is not material to my economic security. It is, as they say, a first world problem. Families (and there are lots of them) who scrap and save to afford their annual holiday will not be so sanguine. Stepping back from the household, and looking towards the economy as whole, the weak pound is an essential shock absorber at this time of economic stress and we should be relieved to see it go down. A weak pound makes sterling assets and exports cheaper (and of course the inverse for assets and imports denominated in other currencies). For those of you who need a pithy explanation of the interaction of exchange rates, current accounts and capital accounts, you could do worse than reading this Lex note.

An interesting email sent to me by a wine-lover. It’s from vintners Clark Foyster and says that their prices will increase in the near future once they have run out of the euros they bought in advance of the vote. Of course, if it applies to wine, it also applies to food.  

People are looking at any number of indicators to divine the health of the economy until official data appear later in the year. Admit it, you’ve looked at Zoopla haven’t you? (wow, the Jones at number 12 have just cut the asking price by £25k!). Chris Giles, Economics Editor at the FT has compiled a Brexit Barometer to look at measures of economic activity. The piece is worth a look, saying that the worst impact was felt just after the vote with a modest improvement in recent days. I wouldn’t read too much into the data this soon after the event but this quote caught my eye: ‘officials in the Treasury say privately that the signs are considerably worse than had previously been estimated and no one knows what is happening across the country yet.’ Let’s see how it all pans out.

Machinery of Government: Lessons of history edition

Despite explicit warnings, the consequences were underestimated. The planning and preparations were "wholly inadequate".

Q. Does the above quote refer to a. Chilcot or b. Brexit?
A. It refers to a. and is slightly adapted from the BBC’s coverage today.

However it could equally apply to Brexit and seems to point to something that seems to have gone deeply wrong in our policy making machinery in recent years. Lord Hennessy is one of Britain’s leading historians of the post-war era and has chronicled Cold War Britain in fascinating detail (often with the assistance of more spooky part of the establishment). He is an expert (one of those!) on the inner workings of government – including a definitive work on Whitehall -  so we ought to pay attention to what he has to say. This is what he told the House of Lords yesterday, and I quote it at length:

 We may pride ourselves on being a back-of-the-envelope nation, but this was excessive. Never have I encountered so many people with so few ideas about what to do in the face of a first order crisis. The litany of post-war crises, which, as a professional historian, I write about from time to time—the sterling devaluations of 1949 and 1967, the Suez affair of 1956, the IMF crisis of 1976 and Black Wednesday in 1992—seem mere blips on the radar screen in comparison.

Never in my lifetime has our politics seemed so envenomed, poisoned still further by a palpable dearth of trust between the governed and the governors. All this at a time when our two major political parties give every appearance of eating themselves, with copious tranches of nervous energy absorbed by their internal stresses and strains.

 In my judgment, the referendum result was like a lightning flash illuminating a political and social landscape long in the changing, exposing yet again fissures we knew about—disparities of wealth and life chances—but whose depth and rawness I admit I had not fully fathomed. What can be done? Winston Churchill, that supreme wartime crisis manager, had a favourite phrase about “rising to the level of events”. That is our pressing duty—all of us in public and political life and the civil and diplomatic services too.

 It is time to stand back and take a long, candid and careful look at ourselves. May I suggest that we need two separate but related inquiries? First, our place in the world. Can we, should we, still aspire to punch heavier than our weight in the world in the way that we do when on autopilot as a nation with a remarkable past and a continuing and sustained appetite for global influence? Secondly, we need to look at our internal constitutional arrangements—the relationships between the nations, regions and localities of the United Kingdom. In my darker moments, I think that 23 June lit a fuse beneath the Union. I profoundly hope not, as a man who loves Scotland deeply and cherishes the union of the United Kingdom almost beyond measure.

 My preferred instruments for these inquiries would be a pair of royal commissions—an ancient institution, rusted by disuse, but it is time to unsheathe it. Failing that, perhaps a brace of Joint Committees of Parliament.

 Of one thing I am certain: now is the time to think above our weight, to draw deep from our wells of tolerance and civility; perhaps even to fashion a new political vocabulary to help us think aloud together as a people and a nation about what is to become of us;  o rise to the level of events; and perhaps even to surprise ourselves and the watching world by the quality, the care and the foresight of what we do.

Money in politics: Leave raised more money than Remain during campaign

The fourth and final pre-poll donation report for the EU referendum was been published today. This covers the period from 10 June to 22 June, the last day of campaigning before polling day. Over the course of the period covered by pre-poll reporting requirements, which began on 1 February, registered campaigners reported a total of £31,834,885 in donations. This includes £14,276,376 donations for those campaigning for 'Remain' and £17,558,509 donations for those campaigning for 'Leave'. By contrast, the 2015 General Election spending was £39,023,564 in total.

Social media posting of the Day

From Have I got News for You:

Brexit Day 12: 'Theresa's a difficult woman, but you and I worked for Margaret Thatcher'

This issue is later than usual so that the result of the first round Tory leadership ballot could be included. Remember: Chilcot’s coming tomorrow…

Conservative leadership: first ballot vote means Fox trots – May enjoys support of half of MPs

The first round of the Conservative leadership election took place today, with one of the five to be eliminated before the next round of voting on Thursday afternoon. Chairman of the 1922 Committee, Graham Brady announced the results just after 1830 and as expected Liam Fox was eliminated, meaning his 16 supporters will now be courted by the remaining candidates.

Results:

1.       May – 165
2.       Leadsom – 66
3.       Gove – 48
4.       Crabb – 34
5.       Fox - 16   Eliminated

329 votes were cast.

May collected half of all the votes available. The key question now is whether it is Leadsom or another candidate in the second slot that goes to the membership. Is a tactical ‘stop Leadsom’ strategy going to be put into play? That is possible if Gove picks up votes from eliminated candidates, and is ‘lent’ support by May supporters in the final round.

Leadsom has had a mixed 24 hours. She received a boost of sorts yesterday when Bo Jo lent his support to her and a Con Home poll indicated she enjoyed deep support in the party membership. However, the hustings last night were described by Huff Po as a ‘car crash’. She was reportedly hammered for failing to distance herself from UKIP donor Arron Banks, which it must be said, is a very awkward position for her to be in. Her pitch, the Sun reports, was ‘bankers, Brussels and babies’ and it went down like a ‘cup of cold sick’ said one MP. While the stop Leadsom spin machine is clearly in overdrive, it is concerning that someone angling to be PM reportedly first said that Article 50 would be triggered immediately, and then later suggested said it wouldn’t be. This is something you need to be pretty specific about if you are taking the UK out of Europe.

Unless all the candidates but one withdraw, the membership will have the final say. A YouGov/Times poll has a wildly different result to the Con Home poll yesterday, and puts May ahead by a country mile (Con Home had Leadsom slightly ahead of May). Oh, how quickly we revert to grabbing onto whatever data points we can, regardless of their reliability. A clear case of what you see is all there is.

We can't resist polls! 

Labour leadership

Tom Watson is meeting the unions today as ‘a last roll of the dice’. Angela Eagle says she has enough support to mount a challenge. It is not really clear what agreement Watson can get or will get. This is looking rather like a Mexican Standoff – or perhaps – mutually assured destruction.

Future relationship with the EU

The status of EU nationals in the UK is proving to be hugely controversial. Andy Burnham has achieved something by securing an emergency debate in the Commons on the matter tomorrow. May is not budging on the issue, and nor is the government. For now.  

The FT reports that the gap left by the resignation of Lord Hill as the UK’s Commissioner in Brussels may be filled by career diplomat, Sir Julian King, who is currently the UK’s ambassador to France. King has a long record working in Brussels, and has been described as a ‘consummate FCO man’. Avoiding a political appointment may smooth the ground for Sir Julian with the European Parliament which will undoubtedly make life extremely difficult for anyone vaguely political.

Juncker continues to enjoy trolling Leave’s beleaguered leaders. He told the European Parliament that “Those who have contributed to the situation in the UK have resigned – Johnson, Farage and others. They are as it were retro-nationalists, they are not patriots…Patriots don’t resign when things get difficult; they stay,” he added.

Today in Parliament

Oliver Letwin, who luxuriates in the magnificent title of ‘Minister for Government Policy’ gave evidence to the Foreign Affairs Committee on the new unit that will support the Brexit negotiations. According to Letwin the unit will:

• Build a team around Oliver Robbins in the Cabinet Office, drawing from departments such as FCO, BIS, Treasury and others with  relevant expertise. The total size of the Unit is yet to be confirmed. Letwin and Robbins are currently identifying gaps in expertise such as trade negotiators. Preparations are underway to either recruit new staff or train up current civil servants.
• Identify the constraints and background situations that will need to be understood by the UK’s negotiators. E.g detailed analysis of tariff and non-tariff barriers that would be faced by specific goods or services without a free trade agreement.
• Develop options papers for the present Cabinet, showing how a post-Brexit UK-EU arrangement could maintain current agreements such as continuing co-operation on security or funding of innovation and science etc.

Our team also covered the Treasury Committee’s hearing with experts Profess or Michael Dougan, Professor of European Law, University of Liverpool; Dr Robin Niblett CMG, Director, Chatham House; Sir Emyr Jones Parry, former UK Permanent Representative to the United Nations; and Raoul Ruparel, Co-Director, Open Europe and the Foreign Affairs Committee’s session with Europe Minister David Liddington. If you are a client you will have received this in your monitoring. If you are not a client, why not? You are missing out.

Companies and markets

My reserves of optimism are depleted today. Volatility was to be expected, of course. Things could yet return to some semblance of normality. But what we see today are stark reminders of the forces that Brexit has exposed the economy to. Sterling hit a thirty-year low against the dollar, Standard Life and Aviva have suspended all trading in their UK commercial property funds and the Bank of England issued a downbeat Financial Stability Report. Damn those experts and their facts.

Mark Carney has been more visible in the last few days than at any time during his tenure of the Bank of England. The Governor and the Bank seem to have come through this with an enhanced reputation (despite the efforts of some to accuse the Bank of bias in the campaign). It is encouraging that one institution in our public life is functioning correctly.  The headlines is a reduction of the UK countercyclical capital buffer rate from 0.5% to 0% of banks’ UK exposures with immediate effect. The FPC expects to maintain this low level at least until June 2017. This is to try to keep lending flowing in the economy. In addition The FPC has identified the below channels through which the EU Referendum could increase risks to financial stability:

• Financing the UK’s current account deficit (which is high by historical standards)
• The UK commercial real estate market (which had seen sharp inflows and in which valuations were stretched)
• Household indebtedness (making households vulnerable to loss or reduction of earnings)
• Subdued growth in global economy
• Fragility in the global financial system

The Treasury issued £2.5bn of 5 year debt at just 0.38 per cent this morning – the first issuance since Brexit. Given how cheap it is for the Government to borrow, I think a Keynesian stimulus package could very easily turn up in the Autumn Statement. Mark Carney has said that we are nearing the limits of what monetary policy can achieve and that means that, in the event of a slowdown, the only lever the government can really now pull is a demand-side stimulus. While Brexit may eventually unlock a number of supply-side reforms (lower taxes, more flexible regulation) their impact will not be felt for some time. Note that Tory leadership candidate Stephen Crabb has already pledged a £100bn fund to finance infrastructure in his campaign. The most gobby of UK economists, Danny Blanchflower, makes a similar point but also can never resist an opportunity to attack George Osborne for austerity policies. (I don’t actually agree we’ve seen austerity in the UK, Osborne’s spending plans have been relaxed considerably since 2010).   

My bellweather stock, Lloyds Banking Group, has drifted downwards from 56.5p towards 50p this week :(

Video of the Day (of the month?): Ken Clark trashes everyone except for Theresa (and even she’s bloody difficult)

Ken Clarke says what he really thinks of the leadership candidates in an apparently off-the cuff discussion with Malcolm Rifkind. If the remarks were off the record, a bit dubious for Sky to release them.

Highlights:

• Rifkind on Gove: So long as he’s not in the final two I don’t mind
• Clarke on Gove: With Michael as Prime Minister we’d go to war with at least three countries at once
• Clarke on Boris: The idea of him as Prime Minister is ridiculous
• Clarke on Leave: I don’t think Andrea Leadsom or Boris Johnson are actually in favour of leaving the EU…it was just that the members were going to vote Leave
• Rifkind on Leave: I don’t think they cared much either way
• Clarke on May: Theresa’s a bloody difficult woman but you and I worked for Margaret Thatcher

Brexit Day 11: 'She’s eerily reminiscent of Thatcher, circa 1974'

Tory leadership contest: back to the future

The competitors were all over the weekend papers and all over the TV studios and I won’t recap all the stuff flying around. The bottom line is that May and Leadsom enter this week with the momentum. The two favourites are grammar school girls, have a strong Christian faith and are both in their fifties. It all sound very familiar.

Simon Jenkins commented that Leadsom’s performance at her launch today was  eerily reminiscent of Thatcher, circa 1974: ‘There was the same tilt of the head, the same slightly forced smile, the same confidence in mouthing the cliched necessities of politics. And there was steel. Leadsom clearly regards Theresa May as potentially weak on EU negotiation.’

That’s not the only part of it that is redolent of Thatcher. Total Politics has an interesting story on Leadsom’s team which includes staunch Thatcherite Lord Bell and tabloid veteran and PR man  Nick Wood. Tim Loughton has been made campaign manager and Chris Heaton-Harris has taken the role of garnering support in the Commons. Potential bump in the road: Leadsom has refused to publish her tax affairs, though will do so if she reaches the final two, she says.

For aficionados of the political interview Andrew Marr gave Michael Gove a pasting on Sunday, including the memorable line that he was seen as a  ‘political serial killer’. A supporter of Boris said that Gove had ‘emotional need to gossip’, especially after a drink, and was therefore unsuitable for Prime Ministerial office. Revenge will be served up in tapas-sized servings in the days ahead I am sure. However, Gove should not be written off. If he can get through tomorrow, he may be able to pick up votes from the eliminated candidates and perhaps, maybe, get to the final two.

 To the ballot…May carries a lot of the support of MPs who have declared now and big beasts such as Michael Fallon and Philip Hammond are now backing her. According to Guido 96 have declared for her, 36 for Leadsom, 25 for Gove, 22 for Crabb, 8 for Fox. 143 are undeclared. Of course allegiances can switch and many have yet to declare their support. Guido’s numbers.

Chart of the day

Source: Conservative Home

The most unpredictable part of the leadership contest is the membership. May is almost certain to be one of the last two, but will she pass muster with the faithful? Here’s the last survey of members by Conservative Home and it’s a ripsnorter. Activists want Leadsom v May in the final, says Paul Goodman.

The first round of the leadership ballot takes place tomorrow afternoon. We should know who has been eliminated by around 7pm. The second round takes place on Thursday, and the final two should be known by a week tomorrow in advance of the membership ballot.

Rights for EU citizens

Quite a lot of handwringing about rights for existing EU citizens today. Leave campaigners Leadsom, Boris and Gisela Stuart have all insisted that the rights of EU citizens already living in the EU must be protected and that they should not be used as pawns in the negotiation. Forgive me, if for one moment, I express some bafflement about this. Many of my colleagues and friends are EU citizens. So I will make the simple observation that the very conduct of the Leave campaign, predicated as it was on immigration from the EU, made many of them feel unwelcome and uncertain in the country where they work, live, have relationships and pay taxes. Brexit by definition does put their status in question. That was the whole point wasn’t it? The government sets out its position in response to an urgent question on the matter from Gisela Stuart...

Rt Hon James Brokenshire MP, Minister of State (Home Office) (Security and Immigration):

• EU nationals should be assured that there will be no immediate change to their status in the UK.
• Decisions relating to the UK’s exit from the EU will be left to a new PM, so I’m not in a position to make new policy announcements this afternoon.
• It has been suggested that Government fully guarantee rights of EU nationals in UK now, but this would be unwise without a parallel guarantee regarding British nationals living in their country. This also might have unintended consequence of prompting EU immigration to the UK.
• Government will not stand for attacks/hate crimes on EU nationals.
• Repeatedly asked what judgment he has made to protect interests of EU citizens and British citizens working/living abroad, Brokenshire responded that making guarantees now could prove an impediment for future negotiations regarding British nationals abroad.
• Need to act with care, consideration and thought.

Theresa May has refused to make any guarantees at this stage, saying that they can’t be offered until there is reciprocity from EU member states. This matter is certainly controversial and will be the cause of quite the battle.

Labour leadership: Blessed are the peacemakers

The unions have kindly offered their services to broker a peace between Corbyn and the PLP. Anyone watching the appalling plight of Southern Railway passengers may be sceptical about this. The honest broker status was slightly undermined by Manuel Cortes of the TSSA union who told Today that the PLP was behaving petulantly and that it was time to ‘put up, or shut up’.  A deal could see Corbyn emerge in party chair type position, with a different leader of the PLP. All the while the threat of de-selection hangs over MPs. Some speculate that Corbyn is looking for his day in the sun when Chilcot is published. He will surely go after Blair.  

UKIP: Farage resigns

‘Is this a joke?’ asked one client. No, it’s not.  On Friday I suspected Carswell would be booted out of UKIP and go back to the Tory fold. Today there is a chance he could become UKIP’s leader. What on earth is going on? Farage has resigned the leadership (not for the first time) because ‘he wants his life back’ having ‘done his bit’ though he has gamely also offered to help independence movements in other parts of Europe. Can we take Farage at face value or is he really ready to step back just a week after securing his life’s ambition?

Douglas Carswell was gutted to hear heard the news…

N.B.  Andrea Leadsom refused to rule out a role for Farage as a Brexit negotiation at the weekend but said in her launch today she had no allegiance to UKIP. Her opponents will doubtless try to infer that she has done a deal with Nige to bring him on board in some capacity. There’s some naughty things going about on social media…

Cheeky 

Future relationship with the EU

Philip Hammond has set out a clear exposition of the trade-offs involved in our EU negotiation. ‘It is already clear what the central trade off with the EU will be: access to the single market versus freedom of movement of people. Those who believe there is no need for such a trade-off have misunderstood something fundamental about the politics of the European Union’ the Foreign Secretary writes. In the same piece he places his support behind Theresa May, saying it’s time for a dose of good old-fashioned British pragmatism.

Alain Juppe, a hopeful for the French presidency next year has thrown in his two cents’ worth. He says everything is up for negotiation. He suggested that compromises could be made on free movement – though the million euro question is what price he would be looking to extract for this compromise. He also called for border controls to move to British soil, reversing a treaty between the two countries.

Article 50 corner

Law firm Mishcon de Reya is to launch a legal challenge on behalf of unnamed clients in relation to Art 50. The firm and its clients think that Parliament must get a debate and vote on Article 50 under our constitution. The general assumption in Government has been that the PM has the powers required without reference to Parliament. Mishcon de Reya, said: “The result of the referendum is not in doubt, but we need a process that follows UK law to enact it. Article 50 simply cannot be invoked without a full debate and vote in parliament.” This is an interesting move – but I can’t quite see what the end game is here for those bringing the case forward. The lack of transparency about the backers of the legal action must also raise eyebrows.

Second referendum, second election?

Lots of people asking about the chances of either or both of these events happening. These issues require a bit of time, so I will come back to them later in the week when – hopefully – the newsflow slows a bit.

HMS Osborne surfaces

Officer of the watch, blow the tanks. We’re going to surface. At the weekend Osborne set out a five point plan for the economy, including – predictably – a proposed cut in the corporation tax rate to 15 per cent (a shade above Ireland’s 12.5 per cent). While this will irritate EU neighbours mightily, it is simply an extension of a long-standing government policy. Osborne’s words at the Budget on corporation tax were these: “all the evidence shows it’s one of the most distortive and unproductive taxes there is”  so this comes as no surprise. The chancellor is clearly looking at eye catching measures to boost UK competitiveness outside of the EU. I’ve said before that Osborne is difficult to hold down for long – a Chumbawamba Chancellor if ever there was one.

Where next for the Remain and Leave campaigns?

The Leave side has flamed-out dramatically over the past week. Just over one week after winning victory against all the odds, its leading figures have had a torrid time.  Bo Jo has gone, Gove has had a very rough week, and Farage has resigned. The only person who has capitalised is Andrea Leadsom, the unknown quantity. Quite extraordinary that the winning side has disintegrated like this.  

Boris Johnson’s Sunday piece in the Telegraph left me perplexed. Entitled Tory candidates need a plan for Brexit - here's mine in 5 points he devoted the first 500 of his 1,000 words to criticising the the Islington Corbynistas who had shouted ‘****’ and a ‘******’ at him last week. ‘They can’t really be defending the waste, the fraud – or the endless expensive caravan of crémant-swilling members of the European Parliament between Brussels and Luxembourg and Strasbourg’ he posits. In his way he makes some important points about the defects of the EU. He then went on to attack Project Fear, Bob Geldof and called Saturday’s remain marchers deluded. However, what we still didn’t see was any vision. It is a rum state of affairs when some of those who wanted the UK to Remain have a more developed plan for the UK’s future outside the EU than some of those who fought for it.  

Eagle-eyed Henry Mance spotted that the Leave Campaign wants to become a permanent fixture on the political scene saying ‘Westminster can’t be relied upon’. Judging on the performance of our political class last week, they may have a point:

Last week Will Straw, director of the Britain Stronger in Europe campaign also suggested that there would be future for the organisation – though under someone else’s leadership. I find it hard to see how that group can work in the future, but I will wait and see.

That Boris Johnson plan in full…

1. There is no risk whatever to the status of the EU nationals now resident and welcome in the UK, and indeed immigration will continue – but in a way that is controlled, thereby neutralising the extremists.
    
2. It is overwhelmingly in the economic interests of the other EU countries to do a free-trade deal, with zero tariffs and quotas, while we extricate ourselves from the EU law-making system.
    
3. We can do free-trade deals with economies round the world, many of which are already applying.
    
4. We can supply leadership in Europe on security and other matters, but at an intergovernmental level.
    
5. The future is very bright indeed. That’s what Geldof should be chanting.

Machinery of Government

Carswell and Hannan spent the weekend castigating our politically neutral and professional civil service for failing to drink the BeLeave Kool Aid. Said Hannan to the Mail: 'They are incurable Europhiles, and all they want is to try to keep the EU project together. After the palpable failure of the supposed renegotiation with Brussels, it's beyond ludicrous to put the same people in charge of our Brexit negotiations.' He added 'I know Ivan Rogers [UK Ambassador to the EU], and enthusiasm for the European project permeates his entire mentality. He and other civil servants are clever, technically brilliant and, in their own fashion, moral people. But they are simply playing for a different team.'   

On that the subject of the Civil Service, Bernard Jenkin MP, one of the staunchest of the Conservative Leave crew and chairman of the Public Administration and Constitutional Affairs  Select Committee has been asked by Brexit minister Oliver Letwin to look at how Whitehall can prepare for the demands of leaving. Bernard Jenkin has called for a Dad’s Army of retired civil servants to return to the fold.

Chilcot’s coming…on Wednesday. The Indy says a number of MPs are seeking to impeach Tony Blair through an ancient Parliamentary law. Henry Mance’s instructive Big Read  in the FT neatly brings together Chilcot and Brexit with the following observation from Rory Stewart MP: “The line linking Iraq and Brexit is a total lack of seriousness, commitment and knowledge in our foreign policy machine” …“The economic mess we’re in now [after the EU referendum] is entirely caused by our foreign policy.” Stewart’s solution? A doubling of the Foreign Office budget.

Trading places

Business ministers Sajid Javid and Lord Price have written to businesses and trade associations to help shape future trade and investment policy and to ask views on what UKTI can do to help. Chief Executive of the Intellectual Property Office John Alty, has been asked to lead a team tasked specifically with engaging with businesses of all sizes on trade policy issues. Guessing that those funding cuts to UKTI might get reversed in the near future… The first meeting of the new inter-ministerial group on business engagement, chaired by Mr Javid, will be held next week.

Companies and Markets

A really troubling problem in Italy bringing further evidence of tensions between member states and EU institutions. Italy’s Matteo Renzi is on the verge of defying the Brussels to provide liquidity to Italy’s struggling banking system if needed. This is a serious challenge to the authority of the European bank stability regime. A view from Zero Hedge: ‘As we noted previously, Brexit will be just the scapegoat used by Renzi and Italy to circumvent any specific eurozone prohibitions. And if it fails, all Renzi has to do is hint at a referendum of his own. Then watch as Merkel scrambles to allow Italy to do whatever it wants, just to avoid the humiliation of a potential "Italeave."

A number of commercial property funds have marked down their assets in the last few days on the back of Brexit following advice from valuers. The typical markdown is 5 per cent. The Evening Standard ran a piece on Friday about London house prices ‘being slashed’. I mentioned that gazundering might be back, and the ES piece reflects that. Get those bargains while stocks last. I’ll be looking out for stories on house prices from the rest of the country to prove that I am not obsessed by the London bubble,

Dislocation in the sector is echoed by some grim news from the Construction industry. Markit’s UK construction Purchasing Managers' Index dropped to 46.0 in June, down from 51.2 in May, its lowest level since June 2009. This shows a strong expectation of contraction and the numbers are worse than expected.  Construction has one of the highest multiplier effects of any industry sector. Markit’s Tim Moore speculated that this would boost the case for a BoE stimulus package.

Jean-Sébastien Jacques, incoming chief executive of mining giant Rio Tinto gave a vote of confidence in London in the Times today: "Do I believe London is a very good place for a head office in the mining industry? Absolutely, no doubt about it. Brexit will have no impact on the head office being in London. We love London."… "All the big mining companies are listed here"… "Do I feel comfortable here? Yes, you've got the right understanding with the banks, the financial industry. It's a truly global city. We're fine." [Full disclosure: Rio Tinto is a Cicero client]

Martin Waller, Tempus editor, suggests that after the LSE/Deutsche Borse tie-up the exchange may move to a neutral location. Amsterdam. Time to drink the Grolsch.   

Look out: Tomorrow Bank of England publishes its financial stability report.

A note on the FT

I seem to recall reading an attack on the FT at the weekend for having taken leave of its senses, being a Remain Pravda etc. I think it was in the Mail (where else?). I agree that in the early days after the Referendum the paper did seem to have a bit of a nervous breakdown – particularly its columnists who just seemed to wail and gnash teeth. But the quality of reporting has been excellent the last few days. There was tons of good stuff in the Weekend edition.

Reshuffle

Could Nigel Farage take Chris Evan’s place as host of Top Gear?  

Video of the day

Following the success of his video for Vice News, Jeremy Corbyn is appealing directly to the membership with a new video saying why he should remain leader of Labour.

 http://news.sky.com/story/1721509/corbyn-stages-fightback-with-facebook-video

Brexit Day 8: 'First you exit, then you negotiate'

That was the week that was

Thankfully today’s issue is a bit shorter than it has been the last couple of days.  An extremely apt quote sent by a fellow John Le Carre fan: “There are moments which are made up of too much stuff for them to be lived at the time they occur.” (hat tip: Cicero alumnus Ed Lakin). The frequency of these notes may slow down next week given the news cycle. I hope everyone has a relatively peaceful weekend.

Conservative leadership: Gove launches, slams big business

Having washed ‎the blood off of his hands Michael Gove launched his campaign today. A rather rum affair compared to the slick May launch yesterday. His speech didn’t give any sense of his ambitions for future UK-EU relations or the UK’s trade relations with either the EU or the rest of the world. He didn’t use the phrase “Single Market” at any point. He did, however, slam big business and financiers.  “I am a passionate supporter of free markets, free trade and free enterprise. In the last two decades free enterprise economics has lifted millions out of poverty across our planet. But in our own country far too often the rewards have gone not to risk takers and job creators but insiders in our financial system and big business who have rigged the market in their interests.” On immigration he said “I will end free movement, introduce an Australian-style points-based system for immigration, and bring numbers down.” He went on “We can reform capitalism, give shareholders more control over how public companies operate and ensure pay once more incentivises the right sort of corporate behaviour.”

PS If you still can’t get over Gove’s knee-capping of Johnson yesterday, the Telegraph’s Gordon Rayner has a gripping piece about the ‘cuckoo nest plot’. The Sun’s Tim Newton Dunn and Harry Cole cover it here in a breathless account of parties, country cottages, swish offices and frenzied text messaging. Our own Joe Moor thinks that Gove’s move is an olive branch to his friend David Cameron.  

Liam Fox wrote in a piece setting out his stall in the Daily Telegraph “I do not believe there is room for membership of the single market, if it entails free movement of people. We do not need to be part of the single market to sell into the single market; countries like the US do perfectly well in that position.” Fox is one of the most ardent promoters of the Special Relationship in Parliament and he has been talking about a points based immigration system for some years.

Still keeping a low profile is Andrea Leadsom, possibly the dark horse of this competition. She’s attracted the support of number of the BeLeavers, including Owen Paterson and Steve Baker. The Sun story referenced earlier suggest that she had been ready to back Boris in exchange for the Chancellorship and Boris had written her a note to that effect to be delivered by Nick Boles. Boles never delivered the note, it is alleged. Andrea Leadsom anecdote: at a fringe meeting at Conservative conference I was asked by a fellow audience member what I thought of Andrea. I said ‘She’s great’. ‘Good,’ the lady replied ‘she’s my daughter’.   

George Osborne has been in submarine mode over the last few days and I think he’s preparing to surface. Key development today is that he announced that he is abandoning his flagship target to get the UK back into surplus by 2020 as the economy is showing clear signs of shock (Mark Carney called it post-traumatic stress disorder yesterday). This follows Theresa May’s pledge that the surplus target would be jettisoned under her leadership. It transpires that Osborne acolyte Matt Hancock is backing Theresa May. Is Osbo preparing to back May?

Remember Guido has the runners and riders here. At the time of sending, 152 of the 330 Tory MPs appear to have given support for one or other of the candidates. May is ahead handily at the moment. Many big beasts including Philip Hammond (remain), George Osborne (remain), IDS (leave), Villiers (leave) are yet to declare their support.

Labour leadership: It’s quiet. Too quiet.

Corbyn is hanging tough today and no evidence yet that he is planning to fold. John McDonnell re-arranged some deck chairs on the Titanic, with a speech on post-Brexit economic policy. He said that Corbyn would face a leadership challenge in days. Thanks, John. There were one or two points worth noting. First, the Shadow Chancellor said the decision of the people must be respected and could not be reversed. He also made some interesting observations on immigration: “Let’s be absolutely clear on the immigration issue. If Britain leaves the European Union, the free movement of people, of labour, will then come to an end.” Labour needed also to “consult with the British people on the nature of the relationship we have with regard to the free movement of people”, he said.

UKIP: Carswell expulsion?

 Via Guido: Farage says Douglas Carswell could be booted out of UKIP on Monday for what appears to be insubordination. If that happens, what are the odds that Carswell takes the Conservative whip again? I think pretty darned high.

Future relationship with EU: “First you exit, then you negotiate”  - Cecilia Malmstrom

Posturing over the single market is beginning already. Trade Commissioner Malstrom offered an opening gambit yesterday in an interview with the BBC’s Mark Urban. She said that the divorce must be concluded before the future trade relationship can be defined. While the UK will remain a member of the EU during the Article 51 process, EU rules prohibit the UK from negotiating trade deals with other countries. If the UK leaves without a new trading relationship with the EU in place it will move to trade under WTO rules.

Why the resistance to parallel discussions? First, there's French and German elections in 2017 which will complicate matters. At the same time TTIP is running into real problems on both sides of the pond. Do they really want to chuck a hard-fought negotiation with the UK on trade into the mix as well?  And of course, timing is one of the most important negotiating ploys each side has and suggesting that a trade deal can only be conducted once the divorce is settled places pressure on the UK to conclude Article 50 as quickly as possible. 

BUT...Risk that the European Commission stance is making the Leave side's argument for them. If the EU is really more comfortable as a walled garden than an open trading bloc, they say, then maybe it is better to go. Remember, nothing makes free-traders in the Leave camp feel more tingly than the idea that the UK will fast-track a clutch of non-EU deals with Commonwealth allies. That will show them!

An opposing view from Cicero’s James Hughes: ‘I think Liam Fox’s argument that other leaders won’t block UK access because it would be damaging to their own economies suggested a very short memory. I can certainly think of a recent example of a  country doing something economically irrational to deal with a populist party at home’. A fair point, well made James.

Parliament gets stuck into Brexit

 The Treasury Committee is hearing evidence on the UK’s future economic relationship with the European Union at 1000 on Tuesday. Answering the questions: Professor Michael Dougan, Professor of European Law, University of Liverpool, Dr Robin Niblett CMG, Director, Chatham House, Sir Emyr Jones Parry, former UK Permanent Representative to the United Nations and Raoul Ruparel, Co-Director, Open Europe

Lords EU Select Committee meets on Tuesday at 4pm. Giving evidence are Rt Hon David Lidington MP, Minister for Europe and Rt Hon Oliver Letwin MP, Chancellor of the Duchy of Lancaster and Head of the Whitehall EU Unit. A must watch for Brexit geeks. Cicero will be providing analysis for clients. Liddington has held the Europe minister post since 2010 and knows the ground intimately. We understand Letwin has already begun meetings with key politicians on the subject.

Article 50 corner: Another great paper from the House of Commons Library, this time specifically on the Article 50 process. The latest in what colleague Tom calls the Article 50 Trilogy. All three below:

• Brexit: what happens next?
• House of Lords: Leaving the EU: Parliament’s Role in the Process
• HoC Lib note: Brexit: how does the Article 50 process work?

Austrian bombshell

Austria’s constitutional court has invalidated May’s presidential election for procedural failings (they found no evidence of manipulation, however). Far-right Norbert Hofer of the Freedom Party was pipped by former Green Party leader, Alexander Van der Bellen by just 30,000 votes, causing a huge sigh of relief across Europe’s capitals. A new election could take place September opening the door to another political nightmare in the heart of Europe. Please, no more!

Micro politics

All politics is local. Small results here and there can give an interesting temperature check (even though turnouts are small). A borough council by-election from Mole Valley in Surrey yesterday…  [Full disclosure: I am a Surrey Conservative and it gives me no pleasure to include this result]

Sadiq and ye shall find

Sadiq’s appears to be stepping up and his office is looking for input from business. He’s pressing the Government for single market access and securing London’s ability to compete in the global market for talent. We’ll certainly be doing all we can to support the Mayor in his efforts to promote the interests of the City. It confuses me that a leftish Labour mayor is going into bat for business, whereas some Tory leadership candidates are spilling out populist anti-business bilge.

Companies and markets

The big market news today is the fall in bond yields. This makes borrowing cheaper for the Treasury – and it looks like they’ll be doing more of that in this cycle than we anticipated given Osborne’s announcement today. Low yields are not a vote of confidence in the global economy – they are opposite. Exceptionally low returns mean that people are risk-off and are expecting more QE. This is bad news for pensioners who will get lower annuity rates, lower returns if they are drawing down, and is another kick in the groin for defined benefit pension scheme liabilities, which increase as returns on gilts fall. This is not project fear, these are simply the facts.

Chart - Bloomberg:  UK Govt Bonds 10 Year Note Generic Bid Yield – last 30 days GUKG10:IND

Just look at that yield go off the cliff after the referendum result…

Britain’s aviation sector is already facing the implications of Brexit. A decision on London airport capacity has been kicked down the road again. News that EasyJet is thinking about its domicile. I am going to bet Ireland is on that list of possible new homes.  

British Airways owner IAG issued a profits warning last week, saying that bookings had begun to weaken even before the vote and so it was little surprise that an email popped into my inbox yesterday. Yes, the BA world sale is on and there are some great fares on offer. Every cloud... A Club World return ticket to Austin, Texas can be had for less than £1,500. And if you fancy New York click here.

It was Andrew Bailey’s first day as the boss of the Financial Conduct Authority, taking over from interim chief Tracey McDermott. Formerly of the Bank of England and Prudential Regulation Authority. We wish him well.

‎Trade bodies: a new hope

Trade bodies have had a rough ride over the last few years. Some of the biggest and most powerful in the City have faced restructurings and member resignations. Brexit is potentially the shot in the arm they need. It’s time for corporate Britain to get its priorities straight and to fight its corner with a united voice.

Paul Mason cuts through the bull

 Yeah, but it’s not as fun as my email is it?

 Reality check: 100 years since the battle of the Somme

Waterloo Station this morning

In a moving act of commemoration, Waterloo Station was filled with young men in WWI battle dress this morning (see my pic above). At 0730 on this day in 1916, tens of thousands of young soldiers went over the top. 20,000 British soldiers were killed on the first day of the 141 day battle. France lost 1,600. Germany perhaps 12,000. On my walk into work I struggled to hold back the emotions that have built over the last week or so. Politicians on all sides should remember that this is not a game, this is real life.

Tweet of the Day

Li Lo has agreed to switch on Kettering’s Christmas lights as an apology for dissing the Northants town on referendum night. Philip Hollobone MP is delighted.

Mouthing off:

Contrition:

Brexit Day 7: "I have never seen so contemptible and irresponsible a situation", "There is a very deep pit in hell reserved for such as he #gove"

Conservative leadership: Gove knifes Boris. In the front. In broad daylight. 

At 7am I was worried that this section might be a bit dull today.  Boy, was I wrong.

The leadership process is moving metronomically towards a conclusion on 9th September. Graham Brady, chair of the 1922 Committee and returning officer, can barely disguise his glee on the TV when discussing it. ‘Look’, he seems to suggest, ‘we Tories know how to run a leadership contest’. The first ballot in the Parliamentary party will be held next Tuesday and my colleague Joe has written a helpful piece here.

So much for the process. What about the politics? The brutality of Tory power politics is breath-taking to behold. It appears to me now that life is imitating art, and that Thrones and House of Cards are now seen as training courses in Westminster rather than entertainment.

The Conservative nominations closed at lunchtime today and there was drama to the last.  Earlier in the week Michael Gove was building support for Johnson. This morning he did Johnson over with such aplomb that it will surely be the subject of an HBO mini-series. A press statement issued at 9am (presumably timed to torpedo Bo Jo’s launch) stated that Gove did not think Johnson was up to the job of leading the country and that he was entering the contest himself. Supporters of Johnson started switching allegiances to Gove. Nick Boles, a Tory moderniser, will run Gove’s campaign.

The apoplexy in the Boris camp was all over town. From the Sun’s pol ed:

To make it worse for BoJo, May's campaign launch was text book. Playing to the Tory right, and backed by Leave stalwart Chris Grayling, she gave an assured and prime ministerial performance. She played to her strengths, focussing on competence and the need to put a safe pair of hand in charge, by implication suggesting that Boris is neither competent nor safe. The BBC’s Norman Smith described it as a ‘hatchet job’ on Boris. She spelled a number of things out: no wriggling out of the result, no second referendum, no general election, no Article 50 before the end of the year, Autumn Statement as usual and a Brexit department in Whitehall to be headed by a Leaver. She even managed to smile and make jokes, which doesn’t come naturally to her.

At just before 12 noon, Boris gave his speech. He called for a capitalism that is fairer and specifically mentioned FTSE 100 pay CEO packets. He then defended his record as mayor – rather more than one might have expected (why?). At the end he said that he would not be standing for the leadership.

At 5pm Gove surfaced, giving an interview to the BBC’s Laura K to twist the knife further. Over the previous days he said that many supporters had said that he was the man to lead the party and the country, not Boris.   

Michael Heseltine gave an excoriating interview to BBC 5Live. Speaking of Bo Jo he said:

“He's like a general that led his army to the sound of guns and at the sight of the battlefield abandoned the field to the claims of his adjutant who said he wasn't up to the job in the first place. I have never seen so contemptible and irresponsible a situation.”

Final runners: Theresa May, Stephen Crabb, Liam Fox, Andrea Leadsom, Michael Gove

Labour: the nightmare continues

For the most part it was a day for the Conservatives. Labour shadow ministers (or at least those left) appear to be in a competition to compete for who can resign in the most innovative way. Rob Marris resigned at the despatch box today during the Finance Bill. Angela Eagle did not launch today but is definitely running (apparently). As mentioned in previous bulletins, if Corbyn is not vanquished the PLP will almost certainly split. It appears that the plan is to let Corbyn stew for a few more days, hoping that he folds.

Future relationship with the EU

Teresa May is going after single market access for services says CityAM editor Christian May. Our Executive Chairman, Iain Anderson is :). Key point: a May Government will not trigger Article 50 until it is good and ready. That could be 2017.

Article 50 corner: The House of Lords library has published a characteristically helpful paper on the role of Parliament in leaving the EU, including Parliament’s role in Article 50. Opinion is divided on the matter. We tend to take the view here at Cicero that the PM has the powers required. Key quote:  The Prime Minister has said it would be for his successor and his or her Cabinet to decide whether the House of Commons should have a vote on the decision to trigger Article 50, the formal process set out in the Treaty on European Union for member states to follow should they decide to leave the EU. Some legal commentators agree that prerogative powers would enable a Prime Minister to take this decision; some have suggested that Parliament could have a role, and others have gone further, arguing that prior parliamentary approval would be required before Article 50 could be invoked.

Machinery of Government

Oliver Robbins, head of the new EU Unit in the Cabinet Office, is on twitter. @OllyRobbins Amongst the 249 accounts he follows are the CIA and the Archbishop of Canterbury. He looks like this:

Olly Robbins

Trading places

The idea of the Anglosphere tends to get Leavers all aquiver. So the news that Australia is looking for an FTA and New Zealand may offer their trade negotiators to assist the UK will surely go down well. I will resist the obvious jokes about expertise in sheep and sauvignon blanc and make the serious point that there are lots of experienced, talented trade bods down under. Of course there’s a quid pro quo. Australia and New Zealand will be looking to get more of their fine agricultural products in British supermarkets once we are out of the EU. Incidentally, Boris Johnson said in his launch speech that he had heard from India, Malaysia and Singapore also wanted to talk trade.

I will keep banging on about this every day – we need to talk about services as well as goods in these negotiations. Services is what we do in this country.

The Governor speaks: Rate cut coming, QE back on the cards?

Mark Carney gave a rather sobering assessment of the prospects for the UK economy following Brexit today. Growth forecast has been downgraded to 1.6 per cent (though that’s still growth). He said “The economic outlook has deteriorated and some monetary policy easing will likely be required over the summer”. The MPC will make an initial assessment on 14 July, and a full assessment complete with a new forecast will follow in the August Inflation Report. In August, the MPC will also discuss further the range of instruments at its disposal. He continued: “Part of the plan ruthless truth telling. And one uncomfortable truth is that there are limits to what the Bank of England can do. In particular, monetary policy cannot immediately or fully offset the economic implications of a large, negative shock”. Our holiday to the US just got more expensive again.  

Companies and Markets

Maurice Lévy, chief executive of Paris-based Publicis, said that France would benefit from Brexit and that start-ups would go to Paris because of the loss of single market access for UK start-ups. We are going to get a lot of trash talking about the UK in the weeks ahead and I am sure corporate France will find it particularly enjoyable sport. It appears that the FT will be the route to market for those wishing to engage in a bit of sledging. I will be picking out the best ones here.

The plural of anecdote is not data. However, I have heard from a friend that two major London estate agents have told him that transactions are holding up at the moment. A cheap pound suddenly makes the market look attractive for foreign investors. However, there were reports today that a major Singapore bank is halting loans to buy UK property amidst uncertainty. An interesting piece from the Guardian on the impact on real estate. My hunch is that people are going to sit on their hands, or else use this as an opportunity to renegotiate on price. Gazundering may be back.

HSBC is staying in London according to Douglas Flint. He told an audience at the TheCityUK conference that Brexit had already been taken into consideration and did not affect their calculation. He said: “The most important thing is we start with the presumption we need very full access to the single market and what will it take to deliver that.” I suggest reading the FT coverage of his remarks. It’s very instructive indeed from one of the most important people in global finance.

FTSE 250 up today again. Is the FTSE experiencing a dead cat bounce? Who knows. I am going to be tracking Lloyds shares as my bellweather of market sentiment on the UK economy. It’s a UK-focussed lender with tons of SME and retail customers and it’s fallen very sharply since Brexit. HSBC, a global bank HQed in the UK has gone up in value since the beginning of the month.

Remains of the day

UEA’s Chris Hanretty has done the maths and calculated that 421 out of 574 English and Welsh Westminster constituencies probably voted to Leave. That is a quite astonishing figure. All the details here.

Saatchi and Saatchi have released ads that were not used as part of the campaign. You can see them here – some of them have considerable impact. One of my favourites below:

Credit: Saatchi and Saatchi

Serious question: is the post-War order breaking down?

While we are all watching the machinations inside the bubble, there are some serious questions to confront as a friend in the US points out:

 “this all worries me in terms of European integration, but also about how the vote is emblematic of a broader anti-trade and anti-globalization push in the West and that plays into the hands of China in particular. Worrying for all of us and the post-WWII global order.”

I’d add that all this dislocation is surely very pleasing for Vladmir Putin too. In analysing the EU referendum, Professor John Curtice spoke of ‘the second dimension’ of politics – which does not respect left/right identity. In basic terms that second dimension is about whether you feel society and the economy is working for you. And it’s clear too many people in the UK do not feel that globalisation has worked for them. Donald Trump has ruthlessly exploited this dynamic. Hillary ought to be paying attention.

 One week ago: the Earth Was feverous and did shake

The UK went to the polls one week ago. It was a dark and stormy night before the polls opened and I didn’t sleep much at all. On the morning of the poll, I sent this quote from the Scottish Play to colleagues:

"The night has been unruly. Where we lay,
Our chimneys were blown down and, as they say,
Lamentings heard i’ th’ air, strange screams of death,
And prophesying with accents terrible
Of dire combustion and confused events
New hatched to the woeful time. The obscure bird‎ Clamored the livelong night. Some say the Earth Was feverous and did shake.”

At the time I thought it was a rather amusing thing to send, without really thinking that the Bard’s words would foretell the week ahead. An esteemed client, and Labour man, observed that good Tories tend to prefer Macbeth to Hamlet.

Tweets of the day

From Jake Berry MP:

Zing of the Day

‘Last time Boris went to Germany for a negotiation, he came back with three nearly-new water cannon’ Theresa May

Brexit Day 6: ‘For heaven’s sake man, go!’ , What does the Fox say?

That a mad day like today feels like more like normality says something for the extraordinary times we have been through. I think what is beginning to become clear is that we now need to get on with the future. Our biggest priority is to ensure we can talk to policymakers to reinforce the need for continued Single Market access. It’s not going to be easy, but it’s what we have to do.

Conservative leadership: Crabb goes fishing but what does the Fox say?   

In his declaration speech Stephen Crabb said that the labels ‘Remainer’ and ‘Brexiteer’ were divisive, and that it was time to accept the will of the British people and move on. The rugby playing Welshman is running as a compassionate Conservative. He said there would be no snap election if he was leader. Late in the day Tory veteran Liam Fox threw his hat in the ring. Keep up with runners and riders here (via Guido)

Conservative Home has membership poll showing May just ahead of Boris (yeah, I know, polls). However this indicates more for support for the Leave candidates in total, so it will be interesting to see how support is allocated when we come to the final two. Bo Jo is reported to have 100 MPs behind him now, with wingman Gove leading the ring around.

Michael Gove’s wife Sarah Vine accidentally copied a member of the public into an email in which she implored her husband to get specific guarantees from Boris on his position before giving his support. In the most delicious example of leadership gamesmanship yet, the Sun’s Tom Newton-Dunn reported that Theresa May stood up Boris Johnson yesterday, snubbing a meeting brokered by senior MPs Justine Greening and Anne Milton.

•  Declared: Stephen Crabb, Liam Fox
• Certain to run: Boris Johnson; Theresa May; Andrea Leadsom
• Considering: Jeremy Hunt; Nick Morgan

 Labour leadership: ‘For heaven’s sake man, go’ (David Cameron, PMQs today)

Jeremy Corbyn is still holding on and Cameron punished him for it at PMQs today. The PM called for him to resign in the national interest. Extraordinary. The Parliamentary Labour Party has all but deserted Corbyn. His panel of economic advisers, including Richard Murphy, Danny Blanchflower and Thomas Piketty have resigned. Angela Eagle is a favourite to challenge. It’s going to be down to the membership to decide, which is loaded with supporters of Corbyn’s left-wing Momentum group as the Tweet below from Pesto confirms. In another twist the Unions met today and to decide whether to renew their support for Corbyn (still unclear whether they will). Unless Corbyn resigns, there is no guarantee a challenger will win. The schism may be coming.

The UK’s future relationship with the EU

‎Cameron went to Brussels yesterday. He said that he wanted the closest possible relationship with Europe and was L to be going. Can’t have been an easy experience. At the same time he said that the EU failing to give him the emergency brake on migration that had led to the Remain defeat. Jean Claude Juncker gave the Commission world view when he rejected that claim and said it was down to the British public being fed a diet of negative stories about the EU. Surely it is time to wake up and smell the Earl Grey?  

Article 50 corner: An extremely good reminder last night from my wife that Article 50 exit negotiations do not include trade (what an exciting household we live in!). As our special report points out it will cover issues such as UK-EU budget contributions, EU-UK investments and status of EU/UK citizens. A big question we need to ask is to what extent other negotiations - for example on single market access - will be paralleled. Much reporting and analysis has elided the two as though our exit negotiation will necessarily settle our trading relationship. This is not necessarily the case.

Machinery of Government

Oliver Robbins has been appointed as the head of the new EU Unit in the Cabinet Office. Robbins is currently Second Permanent Secretary at the Home Office. Oliver has had a long Civil Service career spanning HM Treasury, Downing Street and the main board of an operational agency. From January 2014 to September 2015 he was Director General at the Civil Service, leading on Civil Service reform. Prior to this, he was Deputy National Security Adviser to Prime Minister David Cameron and the UK’s National Security Council.

P.S. Look out for the Chilcott Inquiry on the Iraq War, due on Jul 6. Seven years in the making, it is likely to make explosive reading, striking to the heart of Government, and will take Brexit off the front pages for at least a couple of days next week.   

 Who is the muscle in Brussels?

Is a power struggle taking place between the Commission and Council over who is going to lead Brexit negotiations? The fight is being pitched as the pragmatic Council vs the true believers in the Commission. No doubt the Commission wants to hurt Britain pour encourager les autres. Coverage from Politico.

Sadiq and ye shall find?

The London Mayor has the largest personal mandate of any politician in the UK and the capital voted Remain by a big margin. The City is now looking to Mr Khan to be its chief lobbyist and there is every sign that he is gearing up for it. Khan has named Rajesh Agrawal deputy mayor with brief to protect City. Agrawal is a self-made millionaire who founded Rational FX. He also acted as Khan’s business adviser during his campaign.

Lib Dems resurrected

The result has been the lifeline the Lib Dems need. They have been piling on new members since Friday – and I understand they are now taking 6 weeks to process memberships such has been the demand.

Companies and markets

Vodafone said that they would review their HQ location depending on the deal the UK gets. Visa said that it may move jobs out of the UK. Our holiday to the US looks like it will be slightly less ruinously expensive than it did yesterday. I should have bought dollars when I had the chance. FTSE 250 in firm green territory. Lloyds Bank shares are still in the tank, but have come back a bit today (I bought mine at 75p).

It’s not just UK banks that have been hit. I would be keeping an eye on stocks like Intesa Sanpaolo (below), a well-established Italian bank. Just look at the impact Brexit has had there. They must be mad as hell about this. Soros and Marshall Wace shorted Deutsche Bank filings reveal. Little wonder that gold is up over 8 per cent in a month.

The City‎: Hollande's revenge

The euro bloc has always jealously eyed London's euro clearing. It drives the eurozone crazy that the City, outside the euro zone, clears euro denominated derivatives and securities. George Osborne fought a successful rear guard to keep it here last year in  saying that a 'location policy' was discriminatory under single market rules. That was then. An article from Reuters quotes an unnamed EU official as saying: "The multi-currency union narrative is over. That's why you will see the European Banking Authority going either to Paris or to Frankfurt…That's why you can be sure the ECB will install its location policy now. Not tomorrow, not in two weeks, but this is going to happen over the next two years."

Dutch finance minister Jeroen Dijsselbloem told the BBC that the “Brexiteers have to be honest, they say they want to be independent but if you want to be independent and you don’t accept the European rules and regulations then there will be no access in the future and the I think that’s hard to imagine”.

My Brussels colleagues are working hard to analyse all the implications for clients. They are open for business and await your call! Payment accepted in euros and dollars.

Second referendum

A number of pieces overnight in the press and rumours swirling on the circuit suggesting that Matthew Elliot and Dominic Cummings of Lea‎ve don't actually want Brexit. Some will recall that Cummings said that a Leave vote would enable high stakes brinkmanship, allowing the UK to negotiate a way better deal with the EU and then go back to the country with another referendum. This was an idea Bo Jo seemed to have some sympathy for about a  year ago.  

If the plan really was to march 17 million people to the top of the hill, win the vote, in the process unleashing economic, constitutional and diplomatic crisis as a negotiating ploy, that seems to me to be something that even Francis Underwood would have thought a bit risky. In these bizarre times all scenarios should be kept on the table. ‎However, the central facts are these: we have voted leave (and the people that voted for it wanted it), Europe will not respond to blackmail as a strategy, and the Government is moving forward with Brexit. Angela Merkel too said that Brexit was ‘irreversible’.   

Scotland

Nicola Sturgeon is holding meetings across Brussels today in a bid to build support for Scottish single market access. Donald Tusk, President of the Council, did not meet her. Juncker said the she had won the ‘right to be heard’. Interesting.

Sturgeon has hit early roadblocks with member states. Spain’s Mariano Rajoy says he "believes everyone is extremely against it" and that "if the UK leaves, Scotland leaves".  Francois Hollande said that negotiations would take place with the UK only.

Trading places

An occasional section on who is saying what on trade:

• Paul Ryan, Speaker of the House of Representatives, said that United States should pursue a free trade agreement with the United Kingdom once it has formally separated from the European Union. This would happen in parallel with TTIP.
• Mexico has drafted a trade deal with the UK
•  South Korea wants talks
• Rumours that Commonwealth countries now gearing up to talk trade. 60 million New Zealand sheep can’t be wrong. This was always the dream of leavers – to quickly negotiate deals with key partners free of the encumbrance of the EU agricultural lobby.

However, what about services? These deals will most likely be about trade in goods, of which the UK is an avid importer. As a service economy, where are the deals that will compensate for the potential loss of services exports to the EU?

Thought for the day: The most powerful men in the world could soon be women

Colleague Dan points out that we could (hopefully?) see the US run by Hillary, the UK run by Theresa (or perhaps Andrea) and Germany run by Angela by the end of the year.

Picture of the day (from yesterday)

From Jeremy Corbyn’s car-crash Shadow Cabinet meeting yesterday…
Pic: Sky News

Brexit Day 5 - Labour leadership debacle, return of the adults

Return of the adults

With much complaining about the leadership vacuum at the heart of government, the grown-ups finally returned to public view on Monday. David Cameron and George Osborne both gave statements of admirable class, accepting the result of the referendum for what it is – a legitimate expression of public will. More evidence that the second referendum idea just is not on the table in Whitehall and that DC and GO have no intention of revisiting the matter.  I think there must be some relief that Cameron and Osborne will keep their hands on the tiller in the weeks ahead and it appears to me that they are taking their responsibilities seriously. Lesser politicians would have resorted to recrimination and teddy throwing. Nevertheless the subtext from Cameron was there:  Leave has won, it’s time for them come up with a plan.  It’s worth noting that Johnson and Gove were absent from the chamber yesterday for the PM's statement and we have not really seen either of them today.  

Where Johnson and Gove have been absent Nigel Farage has been in full effect. He has acted magnanimously in victory, goading MEPs.

Labour Leadership: ‘from my cold, dead hands’

 The collapse of the Labour party has been breath-taking. Jeremy Corbyn has seen a total meltdown in his support in the PLP following mass resignations since Sunday. The Times is reporting he has lost a motion of no confidence 172 against/40 with 19 abstentions. Tom Watson and Angela Eagle are due to meet him shortly – presumably the challengers. The motion is not binding and he has already said that he doesn’t recognise the vote and will hold on.  If he is re-elected by the party membership the party could end up with two leaders - the MPs may refuse to recognise him as leader and elect their own. It would then be up to the Speaker, I understand from a well-informed person, to decide which of them to recognise based on which commanded the most support. BTW George Eaton of the New Statesman tweeted that he strongly suspected that Corbyn had voted for Leave.

 Tory leadership: the death of George Osborne is much exaggerated

 It’s all going to be over by 9th September according to Laura K (a week later than advertised yesterday). We will know all the runners and riders by Thursday and the field could be quite large – with Jeremy Hunt considering his options and Stephen Crabb now declared. Liam Fox is in the running too and may have some support from the 2015 intake. Guido has a useful spreadsheet here: https://docs.google.com/spreadsheets/d/19mKbV0UnIbX_lbiinKiquP0ghiFpsMl0owUO6_TJyzI/htmlview?sle=true#gid=0

 We’ve also learned today from media reports that Lynton Crosby is to run the Boris campaign and Liz truss is to back him. Much discussion about Stephen Crabb who is seen as a real star and widely liked in the party but is inexperienced. Probably no time for a novice.

George Osborne is not standing for leadership he says in the Times today. Does Osborne now emerge as a key power broker? He has a large caucus of MPs in ministerial office across government. Who will he put his weight behind? It won’t be easy for him to back Johnson given recent events. But as I said yesterday this is about power as well as personality. If he plays the Chancellor statesman over the next few months he could rebuild his reputation and emerge as a key player in the post-Brexit order. He's experienced and has built formidable international connections. He also has credibility with markets and experience in crisis management. It may be needed.   

A question that has been asked a thousand times in the last 24 hours is: if it is May and Johnson who are the final two that go to the membership ballot, is it a foregone conclusion that Boris wins? Is it even a foregone conclusion that it's May and Johnson on the final ballot? Excellent questions, given the ability of Tory leadership contests to surprise and confound. There are hints that May’s support in the membership could actually be quite strong and that the fight could be quite competitive. I will be asking my party colleagues in the weeks ahead. 

Machinery of government to be thrown behind Brexit

In a statement to the House of Commons, the Prime Minister said that the Cabinet has created a new EU unit in Whitehall to run the negotiation – drawing officials from the Cabinet Office, the FCO, BIS and HMT. The new Unit will report to the whole Cabinet on delivering outcome of Referendum and will ensure new PM has best advice. I would imagine this will attract the brightest and best in Whitehall – which for all the bashing it receives – contains some exceptionally talented and bright officials. We’ll need them.  The Chancellor of theDuchy of Lancaster (Oliver Letwin) will listen to all representations from MPs, and all devolved institutions will be consulted. I would hazard a guess the Lord Maude will again pop up in some capacity.

Second referendum? Second election?

An update on who is saying what…today…

 ·         Health Secretary Jeremy Hunt said that there should be second referendum on the terms of the deal of UK’s Brexit – either through a second election or a referendum

·         Tim Farron says the Lib Dems will fight the next election on a pledge to stop Brexit

·         Boris has said that he will not hold a snap election if elected Tory leader – though the point of snap election is that you don’t tell everyone months in advance. Respite from electoral contests may be a welcome thing.

Scotland

Nicola Sturgeon hasn’t committed completely to a second referendum on Scottish Independence but she has gone as close as she can. I was asked yesterday whether Scotland can afford it. The answer is probably not – with a budget deficit as wide as Scotland’s they would need to implement immediate austerity and would possibly be looking for and IMF bailout before too long. This would not be an attractive option to say the least. There are other serious challenges to address: currency and lender of last resort. However, the political momentum is surely behind her. She has said “I have already made it clear that I regard it as democratically unacceptable for Scotland to face the prospect of being taken out of the European Union against the wishes of the people of Scotland, as expressed overwhelmingly in last week’s referendum. I am now determined to explore every avenue to retain Scotland’s EU status.” If she can get agreement in principle from the EU that Scotland can stay in the Club, it’s probably game on for a second referendum. But in doing so she is taking a big risk,

The UK’s future relationship with the EU

David Cameron arrived at a Summit with European leaders in Brussels. Awkward. Merkel said that the UK would not be able to cherry-pick elements of its EU membership. Which presumably is precisely what the UK negotiators will want to do. Great coverage from the FT here.

Boris is 'tired'

For those of us hoping that Boris Johnson was beginning to sketch out a model in the Telegraph on Sunday were disheartened to see the tweet below from Sam Coates. Given he had campaigned on taking the UK out of the EU, you might have thought a newspaper column on the subject would have been relatively straightforward undertaking.

Chris Grayling has suggested that the UK should reject freedom of movement and move to ‘freedom of labour’ concept. Watch this one – it’s got legs. Last night Nigel Farage he told Channel 4 news that there was a risk that Leave was backsliding on immigration. This is an important development as it shows the divisions are already emerging in Farage’s vision for our future, and that of those who will actually be making the decisions.

 Writing the Daily Telegraph Jeremy Hunt said the UK should negotiate a "Norway plus" option for the UK with Brussels, which would see "full access to the single market with a sensible compromise on free movement rules".

Markets

A better day today for Sterling and FTSE today thankfully. The UK’s credit rating was lowered by Standard & Poor’s from top-rated AAA, Fitch from AA+ to AA, and Moody’s to ‘negative’. Ironically gilt yields fell below 1 per cent for the first time in history as investors rushed for safety.

Football corner

Donald Tusk trolled England last night. It just never ends:

Quote of the Day

Of Brexit Xavier Bettel, the Luxembourg prime minister said: “Married or divorced, but not something in between…We are not on Facebook, with ‘It’s complicated’ as a status.” (Source: FT)