General, Market Event

Third Time Lucky? What’s next for Brexit?

Michael Baker, Friday, 22 March 2019

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Article 50 has been officially extended and the planned date for the UK to leave the EU on March 29 is no more. We now have two dates to add to the table, April 12 and May 22. Why are these dates important? The EU has told the UK if they don’t accept the agreed withdrawal agreement then the UK gets an extra two weeks from the planned departure to leave with no deal. If the UK parliament can miraculously agree to PM Mrs May’s deal, then they can have till May 22 to cross the Ts and dot the Is before the transition period kicks in. A straight forward choice - so what now for Brexit?

A third meaningful vote is the obvious next step to try and get an agreement on the withdrawal deal, but the only issue is that House Speaker John Bercow has ruled this out. Old parliamentary rules can prevent votes on the same deal if nothing has been changed. The government are likely to argue that circumstances have changed, including further assurances from the EU and the delay in Brexit. If a vote does take place and the deal is again voted down, which still seems likely as the DUP and ERG don’t seem to be budging on their stances, then it looks like the UK will depart the EU without an agreement. A decision whether to hold a third meaningful vote is likely to happen soon, with the actual vote potentially taking place next Tuesday or Wednesday - a huge day in the diary!

An idea of an indicative vote is being floated by all the main newswires, which seems to be getting a lot of attention. This would be a vote with possible Brexit options, with the most popular option being pursued by the government. What is not clear is which voting system is used to arrive at a winner. It could be a simple popular vote or a round-by-round elimination vote an option at a time. What scenarios could appear on the ballot may be a no-deal, revoking Article 50, a second referendum, a Customs Union and/or single market access. The vote could take place instead of another meaningful vote or soon after if that fails to pass. Again, this will be another huge event in the Brexit process if the government pursue this option, which would likely take place next week.

The PM will likely anger people with whatever decision or path she takes with Brexit. With so much pushback her premiership is likely to come under very close scrutiny, especially over the next few days. There are calls coming from her own backbenchers to resign but having successfully fought off an internal vote of confidence back in December, she’s immune from another attempt for 12 months. A government vote of no confidence has been successfully defeated before but can be called again, requiring more than half of the participation to signal no-confidence in the sitting government. Other options include voting for a new general election that would require a majority of two thirds. May would likely step down in either of those scenarios. A final scenario would be for Sir Graham Brady, leader of 1922 Committee, expressing that May’s party has lost confidence in her and although she is not obliged to step down, she should consider it.

Sterling has been under pressure since Tuesday, dropping as much as 2% before finding support at the 200-day moving average. News on possible delays and options of exploring different Brexit paths have supported sterling. 

Another exciting week is coming up, with dates for further votes likely to be confirmed over the weekend.

Michael Baker – Analyst

Michael.baker@etxcapital.com

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