Brexit: Uncharted waters
As the year comes to a close, Brexit is more like “a never-ending tale” in Westminster. The drama in the UK government has been reflected in the stock markets globally, as well as depreciating the pound against other major currencies. As I tried to make the case over the last weeks, Brexit will birth an emerging market from the ashes of the UK that we knew as a part of European Union.
British Prime Minister Theresa May lost key support ahead of the December 11 vote on her Brexit withdrawal agreement and political declaration for a future UKEU partnership. With one of these votes, the Parliament granted itself more say on how the government should act if parliament does not pass Mrs. May’s deal. This shifts the balance of probabilities among potential Brexit outcomes.
If the Parliament rejects a hard Brexit (after voting down Mrs. May’s deal), it can now signal what other Brexit policy the UK should go for. While this vote would be non-binding, and the government could technically ignore parliament’s wishes, it would be practically tough to proceed against its will. The odds that May’s deal will pass are falling precipitously. For different reasons, a majority of MPs in parliament seem set to vote it down on the first attempt. While the EU would not be prepared to negotiate another bespoke agreement, it would probably be open to agreeing to one of the off-the-shelf softer Brexit options. Strategists put a 20 percent chance that the UK will sign up to the EU customs union and single market for goods (up from 10 percent); a 20 percent chance that the UK will remain in the European Economic Area via entry into the European Free Trade Association (the Norway option, up from 12.5 percent); and a 25 percent chance that Brexit is reversed (up from 12.5 percent). The path to any such outcome is uncertain.
As the Labour shadow ministers have clearly remarked that in the case a no vote in the Parliament, the call for a snap election will be imminent, that may result in a Labour-led government followed by a referendum. As Guardian columnist Larry Eliot pointed out, investors will only really get interested in events at Westminster if defeat for May is followed by a period of political paralysis or the prospect of a Labour government.