The turbulent UK political landscape is dominating headlines once again this week.
With less than 40 days to go until the official Brexit deadline of March 29th, 7 Labour party MPs have announced their resignation and their decision to sit as “The Independent Group.”
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Biggest Political Split Since the 1980s
This mass resignation is the largest split to occur in a mainstream UK political party since the formation of the Social Democratic Party in the 1980s.
The group has explained the driver behind the move as a desire to “leave the old tribal politics behind.” They have also appealed to other MPs to join them.
The seven MPs: Chuka Umunna, Luciana Berger, Chris Leslie, Angela Smith, Mike Gapes, Gavin Shuker and Ann Coffey stated that they feel Labour, under Jeremy Corbyn’s leadership, had been “hijacked by the machine politics of the hard left”. They claim that the party has become “institutionally anti-semitic.”
Speaking during the group’s first press conference on Monday, former Labour MP Chuka Umunna affirmed:
“Politics is broken. It doesn’t have to be this way”.
Umunna also called on MPs from other parties to join the group, stating:
“If you want an alternative, please help us build it.”
Cross-Party Support Emerging
Indeed, there are already reports of interest from across the political divide. UK journalists have reported that one conservative minister and four conservative backbenchers are already voicing support for the group.
They claim they are prepared to join these “remarkably sensible people” if the government presses ahead with a no-deal Brexit.
Reacting to the shock announcement, Labour leader Jeremy Corbyn said that he was “disappointed” that the group “felt unable to continue to work together for the Labour policies that inspired millions at the last election and saw us increase our vote by the largest share since 1945.” He added:
“Now more than ever is the time to bring people together to build a better future for us all.”
McDonnell Warns Split Will Keep Conservatives in Power
While the party as of now consists of only seven members, the group has expressed its desire to gain widespread support and become a contending centrist party.
With British politics becoming so divided over recent years, perhaps now is the time for a new group to flourish. However, Labour shadow chancellor John McDonnell warned that such a split would likely only serve to dilute support for Labour. Therefore, it could ensure that conservatives stay in power.
McDonnell warned that it would be “like the 1980s” when the formation of the SDP “basically installed Mrs. Thatcher in power for that decade,”
Market Reaction & Technical Perspective
For now, the cross-asset impact has been fairly limited. However, once again, this development highlights the fever-pitch level of uncertainty around British politics. This is certainly off-putting for investors, and the FTSE100 is consequently lower today.
After trading up to pierce the 50% retracement from 2018 highs, along with testing key structural resistance around 7218.5 – 7267.7, GBP has since fallen back below the 50% retracement. However, while above the 7001.7 support level, focus remains on a further topside run. Bulls are looking to challenge the long term bearish trend line from 2018 highs.
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