There is a two-step process to pick the next head of the Tory Party. The leader will be the Prime Minister and head a minority government. May’s minority government was supported by the Democrat Unionist Party from Northern Ireland. It is not clear that if a hard Brexiter succeeds May, the DUP will support it. This could trigger snap elections.
The process begins with the Conservative members of parliament submitting formal recommendations. Assuming more than two are nominated a run-off contest among the Tory MPs takes place on Tuesdays and Thursdays removing the smallest vote getter each time until two candidates remain. At the point, the wider party chooses. The process could take several weeks.
While May arguably played a weak hand poorly, the divide within the Tory Party is severe and may be irreparable even with a stronger leader. The new European Commission may be in place as the October 31 deadline approaches. One of the remarkable developments since the UK referendum nearly three years ago is how united the EU has been and how divided the UK, which is the opposite of what conventional wisdom in 2016 expected.
Sterling remains little changed on the day. May's resignation was leaked reported late yesterday, and follows heightened speculation after the quick rejection of her inducements to get the Withdrawal Bill approved. She was urged to resign before the EU Parliament election and instead announced her intentions before the results were known. The risk that May is replaced by a person who willing to leave in a more disruptive fashion than May has undermined sterling, which is pinned near the year's lows.