The pound dropped sharply on Thursday morning as two members of Theresa May’s cabinet resigned hours after a Brexit deal had supposedly received “collective” support.

Sterling was down more than 1 per cent against both the dollar and the euro, after Brexit secretary Domic Raab and Work and Pensions Secretary Esther Mcvey both stepped down saying the could not back the deal. 

The twin resignations blew a hole in the theory that Theresa May had managed to unify her cabinet around a Brexit deal and plunged the prime minister’s future into doubt.

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The pound was down 1.17 per cent against the dollar at $1.2841 and 1.25 per cent down against the euro at €1.1341.

The UK currency had fallen slowly before the resignation while the FTSE 100 was up half a percent as markets greeted news of the Brexit deal with caution.

Jeremy Thomson-Cook, Chief economist at WorldFirst said: “All eyes are now on Theresa May with a challenge to her leadership increasingly being viewed as the next catalyst for another sterling collapse.”

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Mr Raab announced his decision to step down on Twitter saying: “Today, I have resigned as Brexit Secretary. I cannot in good conscience support the terms proposed for our deal with the EU.”

Mr Raab and Ms McVey’s dramatic resignations will plunge Ms May’s leadership into fresh crisis, and come barely an hour after Northern Ireland minister Shailesh Vara also decided to quit in protest at the Brexit deal.

“The announcement is a major blow for May and others will likely follow suit in offering their resignations with her position now growing increasingly tenuous,” said David Cheetham, chief market analyst at XTB.

“It now seems probable that a vote of no confidence will be tabled, with some reports stating that the requisite 48 letters will be sent by lunchtime. “Support free-thinking journalism and subscribe to Independent Minds

“Unsurprisingly there’s been a swoon in sterling with the currency lower by more than 1 per cent against all of its major peers.

“So far there’s been minimal reaction seen in the stock market with the FTSE rising a little in recent trade to move up to its highest level of the day.”

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