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Article / 14 July 2016 at 10:44 GMT

Saxo on Brexit: Is May Johnson's straight (wo)man?

Managing editor, / Saxo Bank
  • Theresa May cabinet contains number of shocks with Brexiteers prominent
  • Biggest is the appointment of Boris Johnson as foreign secretary
  • May seems to be sticking true to her declared intentions on Brexit
  • Johnson may be being groomed for the premiership role down the line


Boris Johnson has landed one of the plum jobs in the cabinet. Photo: iStock

By Martin O'Rourke

What are we to make of Theresa May's new cabinet? Most of the top jobs have already been doled out with Philip Hammond taking over the role of chancellor, Amber Rudd in as home secretary and Liam Fox to lead the new department for international trade.

Party veteran and longstanding European Union critic David Davies meanwhile takes the reins at the newly-formed position of Brexit secretary. May said Monday that "Brexit means Brexit" and, while Hammond and Rudd were both of the 'Remain' camp, the unceremonious removal of George Osborne from office seems to underpin the sense that she means business.

Perhaps it is in this light then that the appointment of Boris Johnson as foreign secretary makes sense. Frankly, it is difficult to find any other rationale given Johnson's unfortunate propensity for putting his foot in his mouth on the rare occasions he has entered the fray.

US president Barack Obama was subject to that extraordinary "part-Kenyan" attack in April when the Brexit campaign was building towards its peak, and both presidential candidates Donald Trump and Hilary Clinton have been subject to Johnson criticisms in the past. Given the pivotal nature of the UK-US relationship — the so-called "special" relationship no less — it's quite a risk that May is taking here.

Imagine too how Johnson will fare when it comes to dealing with his European counterparts who will no doubt feel that the maverick former mayor of London bears huge responsibility for the victory of the 'Brexit' camp.

It was, after all, Johnson's decision to join the Brexit campaign that propelled it from the sidelines into the mainstream. Able and charismatic though UKIP leader Nigel Farage was, he would never have been able to achieve a decisive victory, and the likes of Michael Gove, Iain Duncan-Smith or the now-tainted Andrea Leadsom likewise suffered from a deficit of real charisma.

So Johnson, it seems, is in for his Brexit credentials, if we are to take this appointment at face value. May wants to send a clear message to those who voted for an exit on June 23 that she's accepted the will of the people and she also wants Europe to understand that she will be seeing the vote through to its logical conclusion.

She might also be looking to harness Johnson's undoubted talents — everyone knows that behind the buffoonery, the Eton alumnus' brain is as sharp as they come — and as the phrase sort of goes, have him 'looking' out rather than 'looking' in.

Those who follow the markets will certainly hope for some calm now as GBPUSD continues to struggle some 13% below the June 23 high and not far off those 31-year lows from one week ago.

The decline and fall of the British pound since June 23


 Source: SaxoTraderGO

A tentative recovery in the last week is exactly that — a tentative recovery. Until GBPUSD re-establishes solid ground above 1.3500, the sense that it could be in for yet another test of the 31-year lows persists.

GBPUSD was at 1.3211 at 1015 GMT.

It is a very similar story with the FTSE 250. While the Brexiteers have pointed towards the recovery and more of the FTSE 100 to beyond its June 23 close, that index consists of a large number of international companies who are less reflective to the state of the UK economy.

The FTSE 250 has meanwhile struggled to claw back lost ground and is still some 5% beneath the June 23 close.

What Johnson will have to demonstrate in this prime role is the discipline to apply himself in a way that is consistent with the huge responsibility that holding one of the three top jobs in the cabinet demands. It is something we cast doubt on after the Brexit vote and it still remains to be seen if he can shed this flaky reputation to show he's able to assume a more statesman-like stance.

The FTSE 250 is still some 5% off its June 23 closer


But is there more to this? We had conjectured at length that the new prime minister, whoever it may be, was taking on a poison chalice as the person who takes Britain out of the European Union and sets in motion a process that could ultimately lead to the breakdown of the United Kingdom.

A cynic might argue that May's ultimately remarkably easy accession to the throne was facilitated by a whole host of seemingly unrelated events from Gove's betrayal of Johnson, to Leadsom's rapid shift into the lead Brexiteer position (thereby scuppering Gove's run at the leadership), her own remarkable fall from grace and now the appointment of May on Wednesday to replace David Cameron and, at least ostensibly, heal the wounds in the party.

Johnson's stooge, no less? Well, that might be a little harsh but the theory that May is only in there as a stop-gap until a meatier alternative becomes available has been doing the rounds. It's not a stretch too far to see her as the Ernie Wise to Eric Morecombe's joker, Oliver Hardy to the accident-prone Stan or straight-man Abbott to prankster Costello.

Certainly, Johnson's back in the fold far quicker than he might have expected to be and you can bet he'll have the life coached out of him as to how to behave over the next few years. Foreign secretary is presumably seen as a better berth than Brexit negotiator where the requirement to have a grasp of incredible detail might have proved a bridge too far for Johnson.

Of course, he'll almost inevitably make the odd gaffe and that will no doubt be indulged as this is, after all, what has helped endear him to the British public.

But the so-called people's champion may well be on a new path towards the premiership. It's different from the one that he thought he was going on before, but if it takes him on a more meandering path through some of the globe's finest capitals, he'll probably not be too unhappy at the prospect.

Theresa May has watched, learned and executed. Photo: WikiCommonsMedia

Martin O'Rourke is managing editor of Saxo Bank


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