Brexit: Growing likelihood of Brexit being postponed

It was a catastrophic night for the British Prime Minister. While it was foreseeable that her deal would be decisively rejected by Parliament, the defeat of 202 in favour to 432 against was a blow that even the gloomiest of pessimists hadn’t expected.  Theresa May then called on opposition leader Jeremy Corbyn to table a vote of no confidence. The vote is to take place at 8 p.m. CET this evening. The fact that May will in all likelihood survive tonight’s vote, despite yesterday’s crushing defeat, shows just how entrenched the current situation in the British Parliament is. Even the Northern Irish DUP has pledged to support May, and the Tory MPs have no choice but to vote for their party leader if they are to avoid new elections.

As soon as today’s vote is out of the way, the government will have to go back to work and the nail-biting over a smooth outcome to the Brexit drama will enter the next round. Next Monday, the Prime Minister will give a policy statement in which she explains how the government intends to proceed. Until then, May will try to wring further concessions from the EU as well as explore possible compromises in cross-party talks that could lead to an agreement in the British parliament. A monumental task! On the one hand, the EU is currently showing little willingness to make substantial changes to the present deal which, if only superficially amended, stands little chance of being approved by the House of Commons in a second vote. On the other hand, the MPs, who until now have not been particularly solution-oriented, show little sign of changing their stance in the near future. Their demands continue to range from a removal of the „backstop“ in the withdrawal agreement, efforts to achieve a softer Brexit to a second referendum – across all party lines.

According to our assessment, yesterday’s defeat has also significantly reduced the likelihood of the UK securing an orderly withdrawal from the EU on 29 March. It is not completely impossible that May succeed in achieving a cross-party consensus, yet the likelihood of this is admittedly not especially high. In spite of all this though, it can also not be said that the withdrawal will now inevitably culminate in a disorderly „no deal“ Brexit. While the risk of this happening is anything but slight, it remains a risk scenario and is not the most likely development, given that the vast majority of MPs continue to categorically reject this possibility. MPs are hardly likely to steer “open-eyed” into a chaotic Brexit for weeks on end. If anything, such a disorderly departure would come about „by accident“ as a result of the continuing blockade in parliament.

Against the backcloth, we now consider the option of postponing the withdrawal date by several months to be increasingly likely. An extension would give all parties the time and space they need to sort themselves out again and rethink their own positions. It would – at least temporarily – give them a clean break from the current political stalemate. But whether the extension of the deadline will be accompanied by new elections or a second referendum will only become clear in the coming weeks. There can be little doubt that a good reason for an extension, such as a new referendum in the UK, would make it easier for the other EU member states to support (unanimously!) it. However, we doubt that they would refuse to give their approval, given that Brussels fears a disorderly Brexit at least as much as London – albeit for political rather than economic reasons. What will remain though, even in the event of an extension to the departure deadline, is the ongoing uncertainty, a factor that will continue to weigh above all on the British economy for some time to come.

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