Theresa May's government 'will collapse over Brexit in 2018', claim Morgan Stanley

Liz Bates

Theresa May’s government will collapse next year because of Cabinet splits over Brexit, leading economists have predicted.



A research note by Morgan Stanley say the Prime Minister's fragile working majority and Labour’s surge in the polls will also contribute to her demise and trigger another election.

They said they expect “enough concessions” to be made during Brexit talks to prop Mrs May up until the end of 2017, but do not consider her premiership sustainable much beyond that.

They write: “We think the government survives in 2017, but falls in 2018…

“We expect the EU to offer a choice between a close relationship in which the UK can participate in the single market and customs union but will be bound by the EU rules of the game, and an arm's length relationship in the UK, in which the UK achieves full sovereignty over borders, courts and laws, but does not participate in the single market and the customs union.

"We think this choice splits the Cabinet and the Conservative party and will lead to a loss of a vote of no confidence in parliament, triggering early elections."

Morgan Stanley also warn that the instability will have a knock-on effect on Britain’s economic performance, causing growth to grind to a halt.

“In turn, we expect the associated political instability to drive weaker consumption and investment, and push growth to a standstill,” the report states.

The report comes just days after Mrs May surprised Westminster by insisting she will lead the Conservatives into the next election.

Mrs May’s hold on the Tory leadership has been fragile since her decision to hold a snap general election which resulted in the Conservatives losing their Commons majority.

But when she was asked during a visit to Japan whether she intended to lead the Tories into another general election, she told ITV News: “Yes. There’s been an awful lot of speculation which has no basis in it whatsoever. I’m in this for the long term.”

She added: “I’m not a quitter.”