Brexit News, Member News

WEBCAST| Brexit update, 30 Jan: How should business interpret yesterday’s vote in UK Parliament?

By Mats Persson, EU UK& Brexit Lead & Specialist Advisor to the UK Prime Minister 2015-2016

Webcast today
We will host an update webcast discussing yesterday’s developments including whether the EU will allow for any renegotiating of the Withdrawal Agreement, with Jan Grauls, a former senior Belgian Diplomat and Mats Persson, former Special Advisor to the UK Prime Minister.

Register now. Wednesday 30 January, 14:00-14:30 then available on-demand using same link.
 
Latest developments:
  • The UK Parliament last night voted on a series of amendments to a motion on the Government’s Brexit plan:
    • An amendment (Cooper) which could facilitate delaying Brexit by nine months was defeated by 23 votes.
    • A non-binding amendment (Spelman) to reject a No Deal Brexit was passed by 8 votes, but this amendment won’t have any legal effect.
    • A cross-party amendment (Brady) – backed by Theresa May and both Brexiteers and Remainers – to negotiate legally-binding changes to the Withdrawal Agreement and remove the Irish backstop was passed by 317 to 301.
  • European Council President Donald Tusk yesterday re-confirmed the EU’s view that the Withdrawal Agreement cannot be re-opened, setting the UK and EU up for a serious clash.   
  • Opposition leader Jeremy Corbyn said he will now engage in cross-party talks with Theresa May.
  • Overall, for now, this was a victory for Theresa May: the amendment she opposed was voted down and the one she supported was passed; Brexiteers and Remainers found a way to work together; a new route for cross-party talks has opened up; the Tory Party largely held together and she arguably has a refreshed mandate to go to Brussels.
  • But it could prove short lived depending on MPs’ moves and the EU’s response over the next few days.
 
Key messages for business planning:
  • Yesterday involved countervailing forces. On the one hand a majority of MPs again signalled its opposition to a No Deal which dampens No Deal risk; on the other hand, May doubled down on highly uncertain and time-consuming talks with the EU, which increases the No Deal risk.  
  • As ever, MPs can only take No Deal off the table by voting by majority in favour of a deal or to revoke Article 50 (stop Brexit)
  • As these were another series of inconclusive votes, Business should continue to mitigate against a No Deal Brexit in business-critical areas until a majority of MPs vote in favour of a legally binding alternative or a No Deal Brexit is procedurally ruled out.
 
Probabilities: political outcomes that could change Brexit outcomes (not mutually exclusive)
Outcome
Likelihood
Rationale
Extending Article 50
60% (up)
The amendment to extend Article 50 was defeated. But with a new round of talks with the EU, the Government looks more likely to run out of time to pass legislation to avoid a No Deal. An extension now looks more likely to be a matter of weeks, not months.
Time to organise: 2-7 days
Second referendum
15% (down)
As we predicted, no specific amendment for a second referendum was tabled in the end and Corbyn has not yet backed this option. Requires a majority in both houses and a long legislative process.
Time to organise: At least 3-4 months but likely longer
General election in next 12 months
30% (unchanged)
The deadlock is not broken and Corbyn could well try to table a new No Confidence vote in the next few weeks. The Cooper amendment would have increased this probability further.
Time to organise: 5-6 weeks
The above political events will clearly have the potential to alter Brexit outcomes and the timings involved, but remember these are paths to one of the five Brexit outcomes we have tracked for the last two years, which have their own set of probabilities, set out below.
 
Brexit outcomes
Outcome
Likelihood
Rationale
WTO i.e., No Deal
25% (up)
Time is running out and this remains the default position unless a majority of MPs agree to an alternative. MPs voted against a No Deal, but that has no legal effect, time is running out and highly uncertain EU-UK negotiations might be coming up.
FTA
15% (unchanged)
Brexiteers preferred option which would look more likely if the Irish backstop (a customs union) is removed as the permanent fall-back option in the Withdrawal Agreement.
Hybrid
35% (unchanged)
Though May’s version has been rejected, the lack of other alternatives and Labour’s vision of Brexit (also involving a de facto hybrid model, but with an explicit customs union) still make this the most likely, eventual outcome.
Single market / Norway +
10% (down)
This week was the moment when Norway+ was meant to be tabled as the compromise option to find a way through the deadlock, which clearly hasn’t happened due to patchy support. Could make a comeback in upcoming votes however.
Stopping Brexit
15%  (unchanged)
We’re still a significant number of political and legal steps away from this option, and no majority support in Parliament. That Corbyn still won’t commit to a second referendum even at this stage lowers the probabilities.
 
 
Key milestones to look out for
  • 7-8 February  – Likely last possible dates for a general election to triggered via a No Confidence vote or voluntarily with the election completed before 29 March i.e., without extending Article 50
  • 13 February – MPs to vote on the Government’s deal with possibly revisions over the backstop
  • 14 February – If deal does not secure majority, Theresa May will table another neutral motion which MPs can table amendments to
  • 21 – 22 March – EU summit
Contact
For any questions, please get in touch with the Brexit and Trade team:

Compliments of EY, a member of the EACCNY