Brexit Bulletin: Who’s in Charge?

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Theresa May's challenges grew fiercer overnight as a former cabinet colleague announced he is running a campaign to oust her, throwing into question the future of Brexit talks.

Grant Shapps, who served as Conservative Party co-chairman during David Cameron's Downing Street tenure, told Bloomberg's Tim Ross he has a list of colleagues who want to choose a new leader of the party and prime minister, after May failed to win a majority in June's national election. The list is growing and includes five former cabinet ministers, as well as Tories from both sides of the Brexit debate, Shapps said.

Shapps is the most senior figure so far to call for May to quit after her disastrous speech Wednesday to close out the Conservative Party Conference. “We think the prime minister should stand aside now voluntarily so there can be a leadership election as soon as possible,” he said in a phone interview. “It is clear that we need to have a reboot and that means it is time to move on.”

Under party rules, it requires 48 Tory lawmakers to write formal letters expressing no confidence in May to trigger a leadership battle. Shapps's group is said to be as large as 30, but he would not confirm the details. He said he wanted May to stand aside voluntarily so the party could hold an election for a new leader. Senior Tory figures on Thursday said they didn't believe there were enough rebels yet to push May out if she is determined to stay.

Home Secretary Amber Rudd, a Remain-backer who is seen as a possible leadership candidate, used an article in the Daily Telegraph to urge May to stay. The show of loyalty was also the first acknowledgement by a Cabinet minister that May's future is in doubt.

If May goes, Brexit talks—which are due to resume on Monday—risk being stalled again for months while the Tories wage a damaging public battle that lays bare their deep differences over the EU. Those divisions make it less likely that the party could settle quickly on a consensus candidate.

Even if May stays, her authority will be shot, both at home, and, crucially, in Brussels. Negotiators won't know who is calling the shots in London and whether the offers May made in her Florence speech will remain on the table. EU leaders will be unwilling to make concessions when they don't know if their opposite number will be in the job next month.

Brexit Latest

Wage Boost | A Brexit-driven decline in the availability of staff and surging demand for workers is pushing up starting salaries, according to Markit and the Recruitment and Employment Confederation. Net migration to the U.K. has fallen to a three-year low after an exodus of European workers following the decision to leave the European Union.

Court Is Key | Britain's brinkmanship on proposing a dispute-resolution system to fill the void left by the EU Court of Justice risks becoming a Brexit deal-breaker, a London think-tank warned. “Disagreements over dispute resolution have the potential to derail negotiations” and the U.K. and the European Commission “are still a long way apart,” the Institute for Government said.

Louder Warnings | The Irish government is working on “extensive” plans in case Brexit talks fail, the foreign ministry said on Thursday in response to questions. Meanwhile Germany's main industry federation said companies must prepare for the possibility of a “very hard” Brexit, citing divisions evident at the Tory party conference.

Cyprus Talks | Cyprus and the U.K. begin talks next week on the status of the two British sovereign bases on the island, with the status of the bases and their Cypriot residents at stake, Foreign Minister Ioannis Kasoulides said. “It matters for Cyprus if it's a hard or soft Brexit,” he said.

BOE Unbound | The Bank of England has prepared markets for the possibility of a rate hike, undoing the perception that Brexit would keep rates on hold, according to Ian McCafferty, one of the Monetary Policy Committee's most hawkish members. “Until recently, financial markets had appeared to believe that, almost regardless of how the economy behaved, Brexit-related uncertainties effectively tied our hands until after the United Kingdom had left the European Union.”

On the Markets | The pound slumped yesterday amid uncertainty over May, and continued to decline early on Friday. If the premier resigns, sterling would head back to post-Brexit lows, says Nomura analyst Jordan Rochester. 

And Finally...

If you want a primer on the risks to trade after Brexit, try the Irish horse industry.

The €1 billion ($1.2 billion) bloodstock sector—made up of racing and breeding—employs close to 15,000 people in Ireland, according to Deloitte LLP. With Brexit looming, the Irish and British horse industries, so close they are essentially twins, face the prospect of delays, tariffs and a drawn-out spell of uncertainty.

It's a microcosm of the wider challenges presented by Brexit, and industry representatives are already making their case in Brussels.

The industry's lament will be a familiar one to regular readers of this newsletter. “As a company, we can't make any concrete plans because we don't know where Brexit will end up,” Henry Beeby, chief executive of Irish auction house Goffs.

“We have no clarity on something that could have such a big impact on our lives.”

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To contact the author of this story: Emma Ross-Thomas in London at erossthomas@bloomberg.net.

To contact the editor responsible for this story: Adam Blenford at ablenford@bloomberg.net, Andy Reinhardt