Deal or No Deal – An update on Brexit26/02/19
Deal or No Deal – An update on Brexit
Well, this isn’t exactly going to plan… While the students of QUT were enjoying their summer holidays, UK Parliament voted to reject Theresa May’s first Brexit deal. The Sterling continues to weaken while volatility rises as the crucial March 29 deadline looms. In this week’s edition of The Take, Trent Candy and Michael O’Shea walk through the current state of affairs and where to from here.
There are no easy answers here as there are still several possibilities at play ranging from Parliamentary intervention to what has the potential to be a ‘nuclear’ No-deal.
The House of Commons Intervenes:
Intervention from Parliament looks like a no-confidence vote (May recently survived a January vote 325 to 306), a second referendum (momentum rising yet still unlikely), or seeing May work towards a new Brexit deal with Labour (fraught with political danger).
The conversation surrounding an unprecedented second referendum has picked up this week with the emergence of a new centrist, ‘anti-Brexit’ group of MPs. Adding more fuel to the fire, Corbyn surprised many this week by throwing his support behind a second referendum if Parliament wouldn’t support a ‘soft’ Brexit on Wednesday (UK time). As the name suggests, this version would see a permanent customs union and a closer single market relationship.
This is effectively where we’re at now. Given the confusion in London, many pundits claim May has lost her bargaining power with EU leaders and is therefore left with two options regarding re-negotiation:
(1) New concessions (unpopular back home for obvious reasons); or
In either event, the EU will be seeking further clarity around what exactly will be enough to achieve a result in British Parliament. One key sticking point is the Northern Ireland border backstop, which is a position of last resort, to maintain an open border on the island of Ireland in the event of a no-deal. At present, goods and services are traded between the two jurisdictions on the island of Ireland with few restrictions, which benefits both countries economically.
A recent agreement would see Northern Ireland staying aligned to some rules of the EU single market, if another solution cannot be found by the end of the transition period in December 2020. That means that goods coming through Northern Ireland would first need to be checked against EU standards, which some groups say would threaten the Union and naturally increase costs to those involved in trade. Regardless, May faced a backlash from MPs at Westminster, and several of her own ministers resigned in protest at the agreement on the backstop. Last week May sent two key ministers to re-open talks with the EU’s Brexit negotiator, Michel Barnier, however the threat of a chaotic no-deal breakup grows as we appear to be no closer to a deal.
(2) Postponing Brexit.
Pursuant to Article 50 of the EU Treaty, an extension of the 2-year negotiating period would require the approval of all member states (27). Latest reports suggest that this is where we’re heading, and whilst the EU would likely agree if May agreed to hold another vote (election or referendum) or had a new plan, it is hard to see leaders agreeing merely to allow the UK more time to negotiate.
All or nothing:
In a move that would resemble something out of House of Cards, May could call a general election or ask voters to choose between her deal and remaining in the EU (note this would require the approval of Parliament). Whilst in theory the general election card is played to allow for an increased majority, May tried this last year to her own detriment and a repeat could leave her position even more tenuous.
Whilst this is the technical default option, many analysts are predicting chaos should this occur (see above re: default options at the border).
With so many involved there are no easy answers here. It might be a good time to brush up on those game theory notes… Let us know what you think will happen below!
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