Snapshot - Managers' views

Brexit goes into extra time

A critical week in parliament could lead to a change in leadership.

27/03/2019

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

  • The EU has agreed to extend the Article 50 deadline, meaning the UK will no longer leave the EU this week.
  • UK parliament is due to vote this week on next steps including a potential third vote on the Withdrawal Agreement.
  • Prime Minister Theresa May is under pressure to resign; a new leader could move towards either a harder or softer Brexit.  

This Friday (29 March) was due to be the UK’s departure date from the EU. However, the UK government’s failure to ratify the Withdrawal Agreement has led the EU to agree an extension of the Article 50 deadline. At last week’s EU summit, leaders decided to grant an extension depending on the outcome of a third “meaningful vote” this week. If the UK parliament votes in favour of the government’s deal, then Brexit will be delayed until 22 May, allowing all parties to pass the necessary legislation to ensure a smooth Brexit transition. However, if parliament votes against the deal, then the UK government must inform the EU on how it intends to proceed by 12 April.

This week, parliament is expected to debate the UK’s next steps before potentially holding a set of indicative votes to establish a consensus. Indicative votes are not binding, but could certainly help plot a path forward. If the government feels it can win a third “meaningful vote” on the Withdrawal Agreement, then it is likely to hold the vote in the middle of this week. This would leave enough time at the end of the week to hold a vote on changing the current law in order to delay Brexit from 29 March, to either 12 April or 22 May, depending on the result of the third meaningful vote.

Despite a recent vote against a no-deal Brexit in any circumstance, the prospect of Brexit without a deal is still a very real risk. The prime minister is under enormous pressure to resign as she carries the blame for the state of the current deal. As we have always argued, we believe that the deal on offer from the EU would have been largely the same regardless of who had led the negotiations, and yet Theresa May might be forced to step aside to ensure a smooth transition.

If May does resign, then a leadership contest could be triggered, but news agencies suggest that a caretaker could step in temporarily. If a remain supporter was to take over and promise to involve the opposition, then we could see a smooth transition towards a soft Brexit, which could include ongoing membership of the customs union. However, if a Brexit supporter was to become prime minister, then the risk of an eventual “no-deal” or leaving on World Trade Organisation (WTO) rules remains, even if there is a transition period in the meantime.

 

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