Shares in Lloyds Banking Group PLC (LON:LLOY), Barclays PLC (LON:BARC) and Royal Bank of Scotland Group PLC (LON:RBS) remained in the red on Friday morning after plummeting a day earlier on Brexit concerns.
More than £6bn was wiped off the combined value of the three UK-focused banks on Thursday after Brexit secretary Dominic Raab and work and pensions secretary Esther McVey resigned in opposition to Prime Minister Theresa May’s draft EU withdrawal agreement.
Raab said he could not support the deal he helped negotiate as it broke promises to voters while McVey attacked the prime minister for accepting an agreement that failed to “meet the tests you set from the outset of your premiership”.
Suella Braverman, Brexit minister at the Department for Exiting the EU, and Northern Ireland minister Shailesh Vara also resigned.
No confidence vote could drag Brexit talks on for longer
May is now facing a vote of no confidence from Tory MPs, which could lead to her removal as prime minister, drag Brexit negotiations out longer and see the UK exit the EU without a deal next March 2019.
Fears of a no-deal Brexit outcome weighed on shares in Lloyds, Barclays and RBS since they are heavily exposed to the British economy.
“Lower interest rate hike expectations, coupled with the fear that a no-deal Brexit could bring chaos to trade, are raising worries over the performance of UK banks going forward,” said IG market analyst Joshua Mahony.
In mid-morning trading, shares in Lloyds fell 1.6% to 54.5p while RBS was down 2.1% to 219.3p and Barclays slipped 0.8% to 1.65p.
Housebuilders were also under the cosh on Brexit worries for a second day running. Barratt Developments PLC (LON:BDEV) shares fell 1.2% to 499p, Persimmon PLC (LON:PSN) declined 1.9% to 2,136p and Travis Perkins dropped 1.8% to 1,013p.
Gove said to have turned down offer to become Brexit secretary
May insisted her Brexit agreement is "truly the best deal for Britain" and that it was her job to persuade MPs to back the deal. She told the BBC’s LBC radio on Friday that a new Brexit secretary would be announced “over the next day or so”.
The BBC reported that secretary of state for environment, food and rural affairs, Michael Gove, had rejected May’s offer to become Brexit secretary because the prime minister would not let him renegotiate the deal.
The government unveiled its 585-page draft withdrawal agreement on Wednesday, which sets out commitments over citizens' rights after Brexit, a proposed 21-month transition period and £39bn "divorce bill".
The most controversial part of the agreement was a “backstop" to avoid a hard border between Northern Ireland and the Republic of Ireland. The backstop would keep Northern Island aligned to some rules of the EU if another solution cannot be found by the end of the transition period in December 2020.
It would also involve a temporary single customs agreement, which would effectively keep the whole of the UK in the EU customs union until both sides agree that it is no longer necessary.
'My deal, no deal or no Brexit at all', says May
The deal will need to get the stamp of approval from MPs in Parliament, and finally from the 27 other EU member states, but May is facing opposition from across the political spectrum. May has said that MPs either vote for her deal, no deal or no Brexit at all.
“When you strip away the detail, the choice before us was clear: this deal, which delivers on the vote of the referendum, which brings back control of our money laws and borders, ends free movement, protects jobs security and our Union; or leave with no deal; or no Brexit at all,” she told reporters outside her Downing Street residence on Wednesday.