Brexit: Last chance
What a week! After the parliamentary break and local elections, the Brexit issue has gained its leading position on the agenda again, this time with a small difference: British Prime Minister Theresa May has promised to set a timetable for her departure from Downing Street following the vote on her deal. Sometime between June 4 and 6, the government will hold its fourth parliamentary vote on Brexit. Many in government are arguing it really will be the last chance for the bill to pass; defeat would create a binary choice for parliament between a no-deal Brexit and revocation. At the time of writing, market watchers agree that the government will fail to get its withdraw
al agreement through parliament. The scale of defeat has come down each time the government has held a vote. But compromise talks with the opposition Labour Party collapsed on May 17 without an agreement. Brexit had been due to take place on March 29, but the UK was given an extension until October 31 after MPs three times voted down the withdrawal agreement May had negotiated with the EU.
At this point, it might seem that the UK is heading down the route of no-Brexit or revocation, although other options are still possible in our view. One is another extension once the current deadline of October 31 nears.
We may need to bear in mind that since the last vote on Brexit a couple of things have happened that could change the status quo. The first is the rise of the new Brexit Party under former UKIP leader Nigel Farage. It looks set to gain the most votes in the European elections on May 23rd and the government is hoping that massive defeats for the Conservatives (and Labour) will persuade sufficient MPs to vote for the withdrawal deal in early June, or else risk losing their seat in parliament to the Brexit Party at the next general election. However, winning seats in European elections is very different from winning seats in a new general election. The second difference is that this time around, the government is putting the withdrawal bill to parliament, which is different from the meaningful vote that MP’s have rejected before. If the bill is rejected, then the near-term market focus would remain on uncertainties over the UK’s path towards exiting the EU.
Then the leadership contest could begin relatively swiftly, with a new leader in place by early September ahead of the Conservative Party Conference and potentially allowing some time for the new PM to go to Brussels for further negotiations. Frontrunners will be ‘hardline’ Brexiteers like Boris Johnson, Dominic Raab and more centrist candidate Jeremy Hunt.