Johnson won the vote of confidence in his leadership of the Conservative Party by 211 votes (59 per cent) to 148 (41 per cent). As a result, he remains Prime Minister for the foreseeable future. Commentators noted that the result was a less convincing victory than Theresa May in her confidence vote in 2019 (63 per cent to 37 per cent) and John Major’s in 1995 (66 per cent to 34 per cent). Margaret Thatcher’s leadership contest against Michael Heseltine in 1990 achieved a margin of 57 per cent to 43 per cent, and she was eventually toppled. The outcome might tempt Johnson into policies designed to bolster his popularity – but not necessarily benefiting the long-term interests of the economy. For example, he might be tempted to push up spending – creating eventual upward pressure on borrowing costs.

The existing rules of the parliamentary Conservative Party mean that there can’t be another vote within 12 months. And by June 2023, the next election won’t be far away (it needs to be before 24 January 2025), so MPs may decide it will be too late by then to change the leader. 

Here are some reactions from wealth managers and investment advisors assessing the impact of the vote against Johnson as MPs were poised to vote. Not all the comments were made after the result:

RBC Wealth Management

“The PM has survived the no confidence vote,  but the number of Conservatives MPs who voted against him is substantial enough to weaken his position further. This is unlikely to be the end of turmoil and the victory is not clear enough to draw a line under the past few months," Frédérique Carrier, head of investment strategy in the British Isles and Asia at , said.

"We think this increases the possibility of further stimulus measures as the PM attempts to improve his popularity. Chancellor Sunak’s recent GBP 15B stimulus package, led expectations for the year end Bank Rate to reach 2.3 per cent. Any further such supportive measures would likely boost further the Bank Rate year end expectations," he added.

Capital Economics
The implications for the economy and the financial markets are not as big as after May’s vote of confidence and resignation in 2019. Back then, the Conservative Party was deciding whether to pursue a soft or hard Brexit (it chose Johnson’s hard Brexit) and, as well as pricing in the risk of a no-deal Brexit, the markets had to factor in the possibility of a far-left government led by Jeremy Corbyn. Now the issues are about tweaks to the implementation of Brexit (i.e. the Northern Ireland Protocol) and the alternative government is Keir Starmer’s more centre-left Labour Party.

So the possible implications for the pound and the economy are smaller by comparison. Even so, Johnson (and Rishi Sunak assuming he remains Chancellor) may respond to this near miss by trying to shore up his political support by taking a hard-line in the negotiations of the Brexit Northern Ireland Protocol and loosening fiscal policy further to help households through the cost-of-living crisis. Both would add to the current inflationary pressure, the former by leaving the pound weaker than otherwise and the latter by supporting economic demand by more than otherwise. That would put yet more onus on the Bank of England to continue raising interest rates. Our view that rates will rise to 3 per cent envisages more hikes than most other forecasters and the financial markets.

Validius Risk Management
“Despite news that Boris Johnson faces a no-confidence vote, GBP is performing well this morning, up against both the dollar and the euro – the FTSE100 and UK rates have also moved higher on the open as traders come back to work after the long weekend,” Shane O’Neill, head of Interest Rate Trading at , said.

“A Johnson loss would raise political uncertainty at a vulnerable time with a likely knock-on effect for sterling, which is already slumping this year as the UK faces the worst dose of ‘stagflation’ amongst developed markets. But economies are not stock markets. The weaker pound has helped make the globally focused FTSE 100 one of the best performing global stock markets this year and so a Johnson loss could push this trend further," he added.

“On the other side of the coin, a victory may help draw a line under the ‘Partygate’ furore and provide some short-term support to sterling, with no further confidence vote allowed for a year under current party rules, though many see uncertainty remaining. Betting markets see Johnson as the next European leader to leave office, whilst predecessor Theresa May resigned six months after winning a confidence vote," he stressed.

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