Brexitension: Under pressure
It all started when late Conservative Party leader and PM David Cameron murmured to renegotiate the EU and the UK relationship in 2014. Then the avalanche started with spectacular events: UKIP campaign for Brexit referendum, the defeat of Cameron in a referendum with a narrow margin, caretaker PM Theresa May’s dutiful (and stubborn) attitude towards keeping the promise of voters, defeat after defeat in the parliament for the Withdrawal Agreement. Time passed, the deadlines changed for the Brexit due date, which was originally March 29, 2019.
After a series of defeats in the
House of Commons, May will try to resurrect the plan for the fourth time this week. The European Commission has reacted with a statement indicating that a ‘no-deal Brexit on April 12 is “now a likely scenario”. Over the past few days, the British pound appears to be have become more sensitive to the risk of a chaotic exit from the European Union. Whether that can still be avoided is very dependent on the reactions of MPs and whether they can find common ground on alternative plans. Even if they do, there is no guarantee that the EU will grant the UK a long extension. The European Council are due to meet on April 10, meaning that there is a lot of work to be done by MPs in the coming days to convince the EU of the advantages of avoiding a hard Brexit. Meanwhile, the pound can be expected to remain very sensitive to political news.
The sour tone in the pound gathered pace after MPs failed to approve any of the amendments brought before the House on March 27. This sent a signal to the market that the Commons could be hardpressed to fall behind an alternative plan to May’s. Whether or not this is a correct assumption is set to be tested on this week. On April 1 there will be another series of indicative votes in the Commons. This will take its cue from the votes that were cast on March 27.
If MPs can find sufficient cross-party support for an alternative Brexit plan, it is a reasonable assumption that the EU would be open to agreeing to a long extension. This would necessitate the UK participating in the May European parliamentary elections. Any failure by MPs to find common ground on April 1 could leave the UK hurtling towards a hard Brexit on April 12.