The British government's Brexit strategy took yet another hit Tuesday after it seemingly had to convince Bank of England Governor Mark Carney to stay on and guide it through the country's divorce from the European Union.
The embarrassing effort comes just one week after the government made concessions to Nissan (NSANY) to lure manufacturing of two of its models to the U.K, with lawmakers accusing Prime Minister Theresa May of assembling an E.U. exit plan on the hoof.
Carney indicated late Monday that he will remain at Threadneedle Street until June 2019, one year more than he had intended, ending weeks of speculation that had unsettled markets and investors.
The Governor had come under intense fire from some lawmakers for what they deemed was a pessimistic view on the U.K. economy in the run-up to and following the referendum in late June, with some calling for him to step down immediately.
Although the full term of a Governor is usually eight years, Canadian-born Carney had a break clause in his contract that would have allowed him to leave after five years for personal reasons related to the schooling of his young daughters. It is now expected that his family will return to Canada in 2018 while he stays in London to see Brexit through.
"My personal circumstances have not changed but other circumstances clearly have, most notably the U.K.'s decision to leave the European Union," Carney wrote in a letter to Finance Minister Philip Hammond, following a meeting with May that lasted more than an hour.
"By taking my term in office beyond the expected period of the Article 50 process, this should help contribute to securing an orderly transition to the U.K.'s new relationship with Europe," Carney continued.
The pound took kindly to the news, peaking at $1.2277 against the US dollar early Tuesday before paring gains to around $1.2252.
Carney's move clearly signals that May intends to trigger the Article 50 exit clause in the first few months of 2017, with a final date of exit scheduled for the first six month of 2019. A time frame which is ambitious given that a trade deal between Canada and the EU, which was started while Carney was Governor of the Bank of Canada, took seven years to iron out.
Many investors have looked to Carney as a constant in the aftermath of the vote and the political chaos that ensued. It was Carney who calmly reassured the nation after the Prime Minister David Cameron stepped down hours after the result was revealed. He made multiple televised addresses in the weeks that followed - unusual territory for a central banker that some saw as a signal of political ambitions he has always denied.
His wavering does not look good for a May government.
Labour MP John Mann said Tuesday that May and Hammond have botched the Carney issue and have been "dragged kicking and screaming by the markets" to extend his contract.
"It should never have to come to the point where his re-appointment became a such a test of strength for the Prime Minister and Chancellor," Mann wrote in the Politics Home website.
Mann argued that the government has put themselves into a sticky spot of having to recruit a new central banker to steer the economy through uncharted territory while negotiating Brexit.
The complexity of Brexit seems to be showing for May. In her Conservative Party Speech in early October, she said the party would take back control. However, recent moves have showed she doesn't have as much control as she may have thought.
After meeting with Nissan CEO Carlos Ghosn in October it was revealed that the government had made concessions to the Japanese carmaker in an effort to lure it to a post-Brexit U.K. On Sunday, Business Secretary Greg Clark told the BBC that he would seek a tariff-free deal with the EU for the car sector. He has refused to give lawmakers insight into the deal with Nissan, however.
The sweetheart deal for some looks to be evidence that the government is scrambling. Labour Party lawmaker Josh McDonnell said it looked as if the government was pursuing a "make it up as they go along" Brexit strategy.