Business Irish

Wednesday 18 September 2019

Richard Curran: 'Don't expect May to resign if Westminster sinks her Brexit deal'

It could be a case of second time lucky on deal for Theresa May in the House of Commons. Photo: Reuters
It could be a case of second time lucky on deal for Theresa May in the House of Commons. Photo: Reuters
Richard Curran

Richard Curran

Last week, British Prime Minister Theresa May emphasised how her Brexit agreement was the "right deal for Britain". She has also said it is the only deal. Assuming a deal is finally concluded at today's summit in Brussels, May faces the enormous challenge of shepherding it through the House of Commons, where there are wolves aplenty.

'Expect a second vote' is the mantra gaining more currency in Britain. Not a second referendum, but a second House of Commons vote on May's deal, possibly after Christmas.

If her deal is sunk in the House of Commons, there will still not be an appetite for a general election among her Conservative Party colleagues. She may not resign, so the only way forward might appear to be a Labour Party motion of no confidence in her.

She could win it, as Tories, even hard Brexiteers, back off the possibility of a general election. Then the real stalemate begins. Ms May could hang on, try to do a little more cajoling or tweaking with Brussels, call Labour's bluff and see if it is "for" anything as opposed to simply "against" everything.

So, she returns to the House of Commons in the New Year and puts basically the same deal back to the parliament. A second run at passing her deal would still be very difficult.

What would change between early December and let's say January? Time and pressure are the big two levers. If she returned to the House of Commons for a second vote, there might be some room for politics to take over instead of posturing and perhaps certain MPs would change their minds.

It is highly speculative, especially when you try to identify which politicians would change their minds and whether there would be enough of them to carry a deal a majority of MPs clearly feel is a bad one.

The political narrative at Westminster is beginning to change as the weight of pressure grows. MPs from both the Conservatives and Labour are saying they will not vote for this agreement, but they will not allow Britain to tumble out without a deal.

Now the deal has been concluded, there is no mileage in pretending that you might walk away. The "no deal is better than a bad deal" mantra is not being uttered as often as it was and is only spouted out now by a relatively small number of hard-liners in the DUP and Conservative parties.

Meanwhile, the political declaration on the future trading relationship between the UK and the EU has been agreed and it is vague, thin and woolly. And so it should be. It isn't even legally binding. For Ireland all eyes must remain fixed on maintaining the watertight properties of the legally binding withdrawal agreement.

All the same, the more wishy washy the political declaration is, the more work will have to be done in negotiating the details of that future trading relationship.

Politics in Britain is at a standstill. The machinery of government is utterly consumed with Brexit and may well be for a long time to come, unless there is a new in/out referendum and Remain wins the day. We cannot rule out a second vote but a second run in the House of Commons on this deal may have to happen first.

Need a mortgage? Come back after the Christmas break

'Need a mortgage, but don't fit the lending criteria? Then apply in January to avoid disappointment'. It could be a new mortgage ad from one of the banks as things stand.

This is because some banks are struggling to manage their allowable exceptions and tend to approve lots in the first half of the year. So by the time November comes, they don't have any exceptions left to make.

The banks are not happy about it and would rather switch to a rolling 12-month quota instead of a calendar year basis. One can have some sympathy for them because they want to do business and are allowed to make certain exceptions under the rules.

They can get caught out by approving mortgage exceptions in one year but the money isn't drawn down until early the following year. This wreaks havoc with the mortgage figures too.

It isn't just about accommodating banks, it is also about accommodating punters who may be a very solid credit bet but cannot get in at certain times of the year under mortgage exception rules.

Ultimately, the attitude of the Central Bank is the only one that counts. The bankers are feeling pretty lonely these days. Gone are the days of lobbying ministers for rule changes or treating the regulator as kind of public sector subsidiary.

Regulators could take the view that if these banks cannot manage their lending flows, it is their problem. On the other hand, figures for mortgage drawdowns show a 2pc decline year-on-year and it isn't ideal to have peaks and troughs of activity.

The mortgage lending restrictions have done their job. Imagine what the housing market would be like if the Central Bank had not introduced them in 2015. Despite the huge demand for housing, banks are not growing the mortgage market as rapidly as they might like, even within the realms of responsible lending.

As long as the lending restrictions apply and the exceptions are confined to specific volumes, how much harm could a 12-month rolling exception approach do?

To use a greyhound analogy, perhaps the Central Bank could loosen the muzzle on the banks a little, but definitely don't slip the lead.

Paddy Power Betfair prepares to roll the American dice

Paddy Power Betfair has been making headlines in the UK by taking a somewhat contrarian stance on the debate about Fixed Odds Betting Terminals (FOBTs) and how quickly the new lower limits should be introduced. Rivals who stand to lose heavily from the move would like it to be later rather than sooner. Paddy Power, however, which will also lose around £40m per year, wants the British government to just get on with it.

Could this reflect a maturity towards the damage of problem gambling and the part FOBTs play in it?

Perhaps. After all, one of its founders and one of its former chairmen have come out publicly against these machines and the link to gambling addiction.

But away from the headlines the betting giant has been pressing ahead with its move into the US.

America is opening up to gambling and it has become the new frontier. Paddy Power is in poll position in the gold rush, with a presence in 15 states, according to a recent Davy Stockbrokers report.

There are plenty of uncertainties about how gambling will evolve in the US where, despite having a former casino owner in the White House, individual states still carry a lot of sway about if and how gambling opens up.

However, Davy produced a very upbeat assessment of the group's potential as the US market grows.

There are still lots of unknowns but Davy estimates there is an "addressable market range" for the group in the US of between $4.1bn and $8.5bn by 2023. This could translate into sport betting Ebitda for the company of £120m to £215m over the medium term.

But Davy has a health warning there too. "The US sports betting market is an exciting prospect for Paddy Power Betfair [PPB - that much we can say with certainty. However, almost everything else regarding this burgeoning opportunity remains unclear."

PPB's share price is down around 18pc in the last year and Davy reckons that, stripping out the US opportunity, the valuation placed on its core business "reflects the multiple operational headwinds facing the group and is arguably the cheapest at which its core operations have been valued for some time."

Share punters are still unsure as the stock fell a little further this week. Betting punters however, are a different story.

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