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Brexit Chaos Somehow Becomes Even More Chaotic

March 13, 2019

March 13, 2019

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Brexit Chaos Somehow Becomes Even More Chaotic

Theresa May’s supposedly ‘revised’ deal was resoundingly voted down by the House of Commons yesterday, leaving Brexit, and UK businesses’ plans, in (further) disarray.

Theresa May’s supposedly ‘revised’ deal was resoundingly voted down by the House of Commons yesterday, leaving Brexit, and UK businesses’ plans, in (further) disarray.

The May government had hoped that a codicil jointly agreed with Michel Barnier on Monday at the eleventh hour would be sufficient to assuage hard-line Brexiteers and the Democratic Union Party of Ireland, who hold the balance of power, over their fears regarding the contentious backstop. Unfortunately for the government, their own Attorney General, Geoffrey Cox, issued legal advice on the codicil that made explicit that while the EU had indicated a strong willingness to negotiate in good faith, there was nothing legally binding that would allow the UK to exit the backstop agreement. The threat of the backstop is twofold; for the Northern Irish, it threatens the Good Friday peace agreement which brought to an end decades of violence and unrest by establishing the legal relationship between the two halves of Ireland. For the traditional Brexiteers, the backstop is seen as a mechanism to keep the UK in the EU single market and the customs union, in which they fear Britain could be trapped indefinitely if there is no legal instrument to revoke it.

The margin of defeat a second time around wasn’t quite as crushing as the one on 15 January, but the numbers gave nothing to suggest that the agreement that her government spent the past two years negotiating can be easily resuscitated. The maths of the Parliamentary voting was pleasingly simple; the deal was voted down with 391 against, 242 in favour, leaving Mrs. May defeated by 149 votes, and needing 75 MPs to bridge the divide. In the immediate future that seems unlikely, so what does it mean, and what comes next?

Well, it is likely to mean a delay to the UK’s exit from the European Union, if indeed it still exits at all. A vote will be held Wednesday evening (UK time) in the House of Commons on avoiding the spectre of a no-deal Brexit. Theresa May has been using the threat of a disorderly no-deal as a lash to attempt to whip the conservatives to vote her deal through, but the margins have proven too great. As such, she has announced the Tory MPs will be granted a free vote (a conscience vote in Australian terms) on whether a no-deal Brexit should be taken off the table as an option.

Hardliner Brexiteers, particularly the European Research Group (ERG) have protested that the threat of a no-deal is an important bargaining chip in the negotiations, but Labour, the Scottish National Party, more moderate Tories and the newly formed Independent Group have all identified the threat that the prospect of no-deal poses to UK businesses, and are seeking to avoid it at all costs.

The Confederation of British Industry (CBI) meanwhile has reacted with dismay to the defeat of May’s deal on Tuesday, identifying the ongoing uncertainty as the biggest threat to UK businesses all across the country. Carolyn Fairbank, director general of the CBI said “Enough is enough. This must be the last day of failed politics. A new approach is needed by all parties. Jobs and livelihoods depend on it.”

The value of the pound sterling plummeted after the publishing of the Attorney General’s legal opinion on the revised exit agreement, but subsequently bounced on the prospect of a no-deal Brexit being conclusively taken off the negotiating table. This left the pound trading only a shade lower against the euro than early last week. Against the dollar, the pound was buying $1.31, down 0.7% for the day. However, analysts at UBS forecast that in the event of a no-deal departure, the pound could drop as low as $1.15, which makes Wednesday night’s vote to avert that prospect all the more crucial.

 


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