Dover and Deal’s New Deal

Incredible scenes took place at PMQs yesterday when the MP for Dover and Deal Natalie Elphicke defected from the Conservative Party to Labour. Elphicke’s defection from the Conservatives marks the second in just two weeks as Members of Parliament look towards the forthcoming general election.

The MP for Dover and Deal cited immigration as a key reason for leaving the Conservatives stating that “From small boats to biosecurity, Rishi Sunak’s government is failing to keep our borders safe and secure”. Elphicke subsequently delivered a crushing blow to the government saying that “Under Rishi Sunak, the Conservatives have become a byword for incompetence and division”.

Generally considered as someone on the right of the Conservative Party, Elphicke’s move to Labour has been met with surprise amongst many commentators, not least because she recently wrote an article titled “Don’t trust Labour on immigration they really want open borders”.

Elphicke’s record on such polices has meant that some in the left of the labour party have voiced concern with for example Momentum stating on twitter that she “has consistently demonised refugees and aid groups”.

In other news, the former chancellor Nadhim Zahawi has announced that he will step down at the next general election.

Nadhim Zahawi served as the Chancellor of the Exchequer from July 2022 to September 2022 under Boris Johnson (preceding Kwasi Kwarteng stint in office). Zahawi took over the position at No.11 from Rishi Sunak and also served as Education secretary from September 2021 and the vaccine minister prior to that. Zahawi’s background prior to Westminster included co-founding You-Gov before moving on to be the chief strategy officer for Gulf Keystone Petroleum.

Zahawi’s announcement adds to the list of Conservative MPs who have announced their intention not to run again at the next general election. There are now 64 Tory MPs who have made such an announcement, more than at any time since 1997. Zahawi also joins a list of prominent MPs including Theresa May, Sajid Javid, Kwasi Kwarteng and Dominic Raab to be calling at a day from the House of Commons.

At 1200 noon today, markets will turn their attention to Threadneedle Street where the Bank of England are expected to maintain their benchmark policy rate at 5.25%.
This would mark the sixth hold in a row following fourteen consecutive rate hikes which saw the Bank of England raise rates to the highest level in 16-years.

Chiefly, markets will be looking to see the breakdown of the votes following the last MPC meeting where 8 members voted to maintain rates against one who opted for a cut. Given that markets were expecting to see one vote favour raising rates, the meeting was generally considered to be more dovish than anticipated.

Since then, inflation has been seen to fall to 3.2%, its lowest level since September 2021. Nevertheless, core inflation continues to remain elevated with the month of March coming in at 4.2% against a consensus of 4.1%. While this was again a modest deceleration from February’s 4.5% level and May’s all-time highs of 7.1%, it demonstrates that the country is not out of the woods yet when it comes to inflationary pressures. Moreover, the owner occupiers’ housing costs (OOH) component of CPIH rose 30bps from 6% in February to 6.3% in March, indicative of the inflationary pressures that remain for millions across the country.

Markets will also be looking for forward guidance, as focus remains centred on when and the extent to which the BoE will cut rates. Presently, money markets are implying that the central bank will conduct around two hikes before the end of the year, and three before March 2025.