Following the historic defeat of Theresa May’s Brexit deal on 16 January, the PM has been negotiating with her own party, opposition parties and with the EU in an attempt to make her deal acceptable to MPs. All the while, the clock is ticking down to 29 March which, if no deal is reached, would see the UK exit the EU by default with very few continuity arrangements and no future relationship framework. This scenario is, in the short term at least, likely to be highly damaging and disruptive to businesses across the UK and EU.
Deal or delay?
The next Brexit showdown is expected to take place on 12 March, by which time the PM has promised to bring forward a second vote on her deal. If it passes this time, we MAY leave the EU on 29 March as originally planned (although a short ‘technical’ extension of a few weeks might need to happen to pass the relevant legislation). On the other hand, if the deal is rejected again, there will be two further votes held on 13 March and 14 March – the first is a vote on whether the UK should leave without a deal, and the second is on whether the UK should go back to the EU request an extension of the Brexit timetable.
Looking at the parliamentary arithmetic – and you can never be certain of these things – if the deal is rejected and no deal is brought forwards and passed before 29 March, it looks likely that no-deal gets ruled out and a delay to Brexit becomes the inevitable outcome – perhaps for around 3 months up to the end of June, although ultimately it is up to the EU to decide how long of a delay to allow.
In a wider sense, changes to our political landscape may also be on the horizon. The row over anti-Semitism in Labour rages on while the Conservatives face hard questions over rising knife crime and their handling of Brexit. This, along with an apparent breakdown in traditional party loyalties, appears to have created fertile ground for the 11 MPs who split from both main parties to form the new Independent Group in Parliament.
How are businesses coping?
As recently as November last year, it was seen as unthinkable that a deal still could not be agreed by January as businesses struggle to plan ahead or deliberate on whether to pull the plug on future investment. And while things may not be quite as bad as some had predicted, the economy remains sluggish and shows no signs of picking up any time soon – in fact, last month the UK economy almost flatlined in the face of persisting uncertainty and political instability.
What happens next?
If the deal goes down on 12 March, don’t expect an immediate market reaction – many pundits are already betting the PM will probably lose again, although probably by a much narrower margin than last time round. If Parliament then votes for a delay, things might pep up a bit with businesses granted a further period of certainty – however, if it looks like we’re heading into a no deal, it seems reasonable to expect that the markets would react very badly to such an outcome.
However, if Theresa May defies political gravity and manages to secure a small majority for her deal, we’ll likely leave as planned on 29 March or perhaps at some point in April after a technical extension to Article 50 – after which, trade negotiations with the EU on our future relationship will begin.