Rethinking Europe

Britain’s “B Day”

It’s time for the British Parliament to decide on Brexit.

Credit: Prachatai www.flickr.com

Takeaways


  • We are probably about to enter the phase of peak uncertainty whereby parliament rejects Mrs. May’s deal but does not yet have an alternative.
  • Ironically, the best chance Mr. Corbyn has of toppling the government could be instructing his MPs to back Mrs. May’s deal – which includes the contentious backstop proposal.
  • The threat of a socialist like Corbyn ending up in charge of Downing Street No. 10 is the glue that binds the warring Conservatives together.
  • As the UK parliament seems to be increasingly lurching toward a soft Brexit, the incentive for the EU to try and help Mrs. May in order to avoid a hard Brexit is low.
  • Expect the UK to secure a semi-soft or soft Brexit (a 55% probability) or completely reverse Brexit and remain in the EU (a 25% chance).

If, as seems likely, the House of Commons rejects Prime Minister Theresa May’s Brexit deal (voting begins at around 7pm London time on January 15th), all hell could break loose as the various factions of parliament struggle to gain control of the Brexit process.

In the end, expect the UK to secure a semi-soft or soft Brexit (a 55% probability) or completely reverse Brexit and remain in the EU – probably after a second referendum (a 25% chance).

Here are the key questions ahead of the vote:

1. Will parliament back Mrs. May’s deal?

Short answer: Probably not (only a 20% chance it will).

The odds are stacked against Mrs. May. For different reasons, at least 40 hardline Conservative Brexiteers and 10 Northern Irish Democratic Unionist Party (DUP) MPs are unlikely to support the deal.

As pro-EU and moderate Conservatives believe that Mrs. May’s deal will fail anyway, they will be less inclined to back it for the sake of party unity. Mrs. May only has two real chances to get her deal through:

1. If she can convince MPs from the Northern Irish Democratic Unionist Party (DUP) – on whom the Conservatives rely for a majority in parliament – that the EU’s soft-guarantees that the Irish backstop would only be a temporary measure are credible.

And in addition, if she can convince the Brexiteers in her party that the choice is now between her deal, an even softer Brexit, or even no Brexit, and hence that her deal is the hardest version of Brexit possible.

2. If, failing the first option, Mrs May could get legally binding changes to the text of the UK-EU Withdrawal Agreement. The EU has already said that it is not willing to re-open the already agreed Withdrawal Agreement.

As the UK parliament seems to be increasingly lurching toward a soft Brexit now anyway, the incentive for the EU to try and help Mrs. May in order to avoid a hard Brexit is low.

2. Will Mrs May come back with an alternative deal?

Unlikely. Not least because Mrs. May faces severe time constraints.

Parliament has voted to limit the PM’s ability to come up with a “plan B” in case her deal fails to just three sitting days in parliament.

Parliament will likely debate and vote on whatever the PM comes up with for “plan B” on Monday, 21 January. This would give her the rest of this week and the weekend to negotiate with Brussels and the various factions of the UK parliament from which she needs to win support.

Even if the EU was willing, because of the time constraints, Mrs. May will not be able to renegotiate her deal. The best she can hope for is that further clarity from the EU on the backstop will be enough to bring the DUP on board.

If Theresa May can get the DUP on side, there is a good chance that the Brexiteers and the rest of her party would follow. If Mrs May loses a second vote, or concedes defeat early, it will then likely fall to parliament to come up with a solution.

3. Will Mrs May resign if she loses badly?

Probably not.

There are various estimates across the UK press about how badly Mrs. May is likely to lose, ranging from 100 to 200 votes in the 650-seat chamber. Only her most loyal supporters from her party seem ready to back her deal. Of course, the larger the margin of loss, the higher the chance that she would resign.

Still, her resigning would be a surprise. If the PM is anything, she is resilient. While opposition parties and maybe even some of her most hardline opponents from the Brexit camp of the Conservative Party may call for Mrs. May’s head, so long as the government stands, it’s up to her whether she leads it or not.

Any vote of confidence in the PM by parliament that was tabled by an opposition MPs could only be symbolic. Only the party in government can get rid of the prime minister. And having secured the support from a majority of her own party MPs on December 12th, she is immune to another such vote for one year.

4. Will there be snap elections?

There’s a small chance.

Far-left Labour leader Jeremy Corbyn has said he will table a vote of no confidence in the government if parliament votes down Mrs May’s deal.

The Conservative-DUP alliance commands a slim 13-seat working majority in the House of Commons. To win such a vote, Mr. Corbyn would need support from all his MPs, all MPs from the other smaller opposition parties and a handful of MPs from the government.

This seems like a stretch. The primary reason is that the threat of a socialist ending up in charge of Downing Street Number 10 is the glue that binds the warring Conservatives together.

While the DUP shares the Conservative’s antipathy towards Mr. Corbyn, it is the most likely group within the government to rebel. However, since its main objective is to avoid a Brexit outcome that would split Northern Ireland from the UK, it would suit the DUP if parliament rejected Mrs May’s deal.

Ironically, the best chance Mr. Corbyn has of toppling the government could come by instructing his MPs to back Mrs. May’s deal – which includes the contentious backstop proposal. If Mrs May’s deal passed, DUP MPs may be incentivized to vote against the government in a confidence vote in an effort to undermine the deal and the backstop.

5. Can parliament prevent a hard Brexit?

Yes, but only by agreeing some Brexit deal.

By law, the UK is due to leave the EU on March 29th, 2019. A hard Brexit is the default option unless the UK and the EU come up with some agreement for the future partnership.

Even if the UK parliament amends tomorrow’s vote to include a vote on a hard Brexit, the vote on a hard Brexit would be merely symbolic unless the UK and EU could agree some alternative to Mrs. May’s deal or if the UK were to unilaterally withdraw Article 50 to stop Brexit altogether.

6. What is the likely path forward?

Hard to say.

As a rough guide, expect the following:

1. Parliament will vote down Mrs. May’s deal on January 15th as well as in any second vote before or on January 21st.

2. Mrs. May will declare that either a hard Brexit should be the policy of government – and allow parliament to vote on it (with an ability to signal a preferred alternative outcome for Brexit) – or to allow for a series of votes within parliament on the various off-the-shelf options for the future UK-EU partnership to see where and if a majority lies.

Beyond that, it would be down to government and parliament to implement any agreement and, if needed, ask for an extension to Article 50 to do so.

At any rate, we are probably about to enter the phase of peak uncertainty whereby parliament rejects Mrs. May’s deal but does not yet have an alternative. The uncertainty will last however long it takes for parliament to come up with a majority for a solution.

However, if parliament fails, the UK will end up in a hard Brexit. This is the risk to watch.

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About Kallum Pickering

Kallum Pickering is senior UK economist at Berenberg Bank in London.

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