The pound started to tumble to three year-lows on Tuesday, as the British prime minister Boris Johnson warned on Monday evening that he is ready to call elections.
From the No. 10 podium, Johnson reiterated his theory that a deal with the EU was possible precisely because the UK was willing to leave without a deal. He said that he wanted his government to go beyond Brexit, promising big spending on health, education, and police services.
But he also warned that he would go to the polls rather than ask for a delay of Article 50 implementation.
It appears Conservative backbenchers are determined to tilt the political balance. Ex-chancellor Philip Hammond told BBC 4 on Tuesday that he is convinced there is enough support for a bill seeking to delay the UK’s exit date to pass.
The legislation that has been leaked to the press instructs the prime minister to ask the EU for an extension of the Brexit process until 31 January 2020.
In his speech on Monday Johnson threatened rebel Conservative MPs that they face expulsion from party and deselection if they challenged their government. Johnson also warned that he prefers elections to calling for a Brexit delay.
Theoretically, snap elections could happen as soon as October 14, if parliament backs such a motion; that is unlikely. The law requires a 2/3 majority for early elections. Although the leader of the opposition Jeremy Corbyn has repeatedly called for elections, Northern Ireland Shadow Secretary Tony Lloyd made clear on Tuesday that Labour would vote against a motion calling for elections before October 31st.
Of course, Johnson could resign, but he has vowed to carry Brexit over the line. But the government cannot “dissolve” the parliament, which is possibly why it has opted for a 23-day prorogation that limits the scope of the opposition to react.
For those wishing to avert a no-deal Brexit, staking everything on what happens on the day of the election is a big risk. Theoretically, Johnson will be campaigning with the promise to deliver Brexit and a unified Leave camp against a fragmented Remain. However, it is hard to contain that the Conservative party can complete a purge of people that have served in parliament and government for decades – such as Justine Greening, Philip Hammond, and Kenneth Clarke – without a cost to its electoral influence, especially in Scotland.
At the same time, the suspension of parliament until October 14 is being challenged at a court in Edinburgh, Scotland. The case is brought by several Scottish MPs.
In any event, markets seem to be betting on the increasing odds of a no-deal Brexit. On Tuesday morning the sterling was trading at its lowest level since the so-called “flash crash” of October 2016. The pound fell below the $1.20 and £1.10 threshold. In the eve of the EU referendum in June 2016, the sterling was trading at about $1.50 against the dollar.