Will a vote of no-confidence be necessary?
Outgoing UK Prime Minister Boris Johnson finally conceded that his position is untenable following the most resignations from government that the country has seen in such short order. Things are likely to still take a few interesting turns before he exits No.10. The pound and the market’s initial reaction were widely euphoric at the prospect of an end to the political chaos that has marked his time in office, but it is unlikely to be sustained – the economic malaise that the UK finds itself in is unlikely to reverse course anytime soon. Johnson could stay on as an interim leader until a new one is decided, which would mean a few more months clinging to the trappings of power, albeit effectively neutered. Were that to happen, the Labour Party have already signalled that they would instantly push for a vote of no-confidence in the government which, should they win (which is more than likely), would require the Queen to appoint a prime minister. Constitutional crises are not good optics from a market perspective but then should we not have expected this eventual outcome? UK risk assets look decidedly unattractive until this political circus has packed up and moved on.
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