Top 3 developments
- May states the meaningful vote could be as late as 12th March.
- May offers Parliament a vote on both a no deal option or an extension of Article 50 if the meaningful vote is rejected.
- Brussels state that they will only accept an extension of Article 50 if there was a clear objective from the UK.
UK Update
Not such a meaningful vote…
The Prime Minister is facing criticism this week after accusations that she is running down the clock by delaying the meaningful vote up until 12th March. This date is significant as it is the day before the Chancellor, Philip Hammond, is due to give his Spring Statement, which could be used to initiate emergency no-deal preparations if necessary. Additionally, it is the day before Yvette Cooper and Oliver Letwin’s plan to delay Brexit would start to take effect – meaning MPs could go into the meaningful vote knowing their choice is between May’s deal or a delay the following day.
May has finally bowed to cabinet pressure and announced that she will give MPs a vote on the UK leaving without a deal on the planned exit date of March 29th if her agreement falls in the Commons again. This vote will occur the day after the meaningful vote and, if this should fail, Parliament will have a vote to extend negotiations for a “short, limited” period the following day. Michael Gove, the environment secretary, has asked whether the vote to delay Article 50 would be a whipped vote and it is noteworthy that the Prime Minister did not give a definitive answer, implying that the Government may apply pressure to get the Withdrawal Agreement through without a Brexit delay.
There is potential that the European Research Group might cave in and support May’s deal in order to avoid a Brexit delay and further changes to the agreement. Jacob Rees-Mogg has said that those who want a delay are pushing to stop Brexit, which was “the most grievous error that politicians could commit”. The Agriculture Minister, George Eustice, has also expressed outrage at the potential of a Brexit delay, resigning three days after the Prime Minister made the announcement. These comments suggest that there could be potential for Brexiteers to vote in favour of May’s deal over fears of what a Brexit delay could mean for the negotiations as it will be hard for Brexiteers to claim that Brexit has been stolen from them if Article 50 is extended when they could have delivered Brexit by voting for May’s deal.
Theresa May or May Not Get Her Way
Further Brexit votes took place in Parliament this week as the Speaker selected five amendments to be debated and then voted on. These amendments were proposed by Jeremy Corbyn MP, Ian Blackford MP, Caroline Spelman MP, Alberto Costa MP and Yvette Cooper MP.
Parliament voted through the Costa amendment with no objections. This amendment calls on the Prime Minister to seek a joint UK-EU commitment to adopt part two of the Withdrawal Agreement on Citizens’ Rights and ensure its implementation before the UK leaves the European Union, regardless of whether a Withdrawal Agreement is agreed upon.
Additionally, the Cooper amendment was passed by 502 to 20. This amendment seeks to hold the Government to deliver the votes promised by the Prime Minister earlier this week, therefore setting the following timeline in motion:
- 12th March – second Meaningful Vote on the Prime Minister’s deal.
- 13th March – if the deal is rejected, a vote will be held on leaving the EU with no deal on 29th March.
- 14th March – if no deal is rejected, the Government will bring a vote on a short, limited extension of Article 50.
Theresa May is continuing to battle with her party after accusations that she is running down the clock by delaying the meaningful vote until 12th March (two and a half weeks before the Brexit date), and the threats of resignation from senior cabinet ministers if she does not take no deal off the table. This series of votes seeks to ensure that no deal will not happen unless MPs express their support for it, which appears to be an incredibly unlikely outcome. The Cooper amendment essentially ties May to her word by making it binding, so the Prime Minister cannot delay or alter these votes.
Once bitten, twice shy
Jeremy Corbyn unveiled a plan on Monday night for Labour to back a second referendum if they failed to secure a Brexit deal that includes a customs union. After a week where he lost 9 MPs due to his lack of leadership on Brexit and antisemitism, whilst facing huge pressure to support a second referendum, this decision can be seen as a move to appease his supporters and prevent a further exodus of Labour MPs.
Labour’s proposal is a referendum to either support the PM’s deal or to remain in the EU. It rules out a no-deal Brexit – probably the only scenario that all Labour MPs agree they want to avoid – and is conditional on the Labour policy to remain in the customs union failing to secure Governmental support – Jeremy Corbyn’s amendment on this point was subsequently rejected by Parliament. There has also been talk this week of Labour implementing a second referendum through a public vote on the Withdrawal Agreement, if it is passed by Parliament. The changes this week suggest that Labour does not have a clear plan of bringing a second referendum into effect, bringing doubt over the eventuality of such a manoeuvre.
The PM has naturally rejected this plan; however, it shows a severe lack of confidence in her deal winning the support of the general public, and it confirms the Conservative Government’s refusal to offer no Brexit as a possibility.
Unpalletable
Government was forced to hold emergency talks with industry leaders this week after it emerged that the UK doesn’t have enough wooden pallets to export goods to the EU if we leave without a deal. EU regulations set out that if you are a non-EU member, you must comply with a strict set of checks and requirements to trade goods into the EU. These rules include very specific requirements for wooden pallets, and there is a severe lack of supply of these pallets in the UK.
With 31 days to go before Brexit day, this admission came as a huge shock to industry leaders, who face weeks of delays to export goods into the EU while the Government scrambles to replenish the stock of pallets. One of the business leaders in the meeting said that “it is the tiny, procedural, mandate-seeming stuff that will absolutely trip people up” and stated that the UK was “not even remotely ready” for a no-deal Brexit.
On the same day, the UK Government published an impact assessment paper of a no-deal Brexit. It highlighted that food prices were likely to go up and that businesses could face additional costs of up to £13bn a year due to increased customs checks. It also warned that there was “little evidence that businesses are preparing in earnest.” But after the pallet oversight, businesses are most likely thinking likewise about the Government.
Keep Carney and Carry on
The UK and US have finalised a long-term arrangement to jointly oversee each other’s derivatives market, preventing the risk of huge disruption to banks and investors in the event of no-deal. The UK and US jointly oversee the vast majority of the global derivatives market and collectively trade about $1.2 trillion in the market per day. This arrangement was not made specifically because of the risk of a no-deal Brexit, as it was finalised to begin on the 29 March 2019 “whatever form Brexit takes”, according to Bank of England Governor Mark Carney.
Banks are undoubtedly relieved that there will be some continuity in the derivatives market and the UK’s reputation as a global hub for finance is somewhat secure. However, there are still concerns that the necessary financial services regulation won’t be in place if we leave without a deal. There is still legislation going through Parliament which is absolutely crucial to ensure that the UK’s financial services regulation is up to date.
The Financial Services (Implementation of Legislation) Bill is going through Parliament at the moment, and gives powers to the Treasury to deliver updated financial services regulation in the event of no-deal. But this Bill still has two more stages to go in the Commons before it becomes law. It is likely that the Treasury have the relevant changes drawn up and ready to go as soon as this Bill becomes law, but with less than a month to get the Bill through Parliament and to implement these changes, there is no doubt that it will be a close shave to put the relevant legislation in place before our proposed exit date.
EU Update
EU have a cunning plan
Following the announcement of a potential vote to extend negotiations, if both the Withdrawal Agreement and no deal are rejected by Parliament, Emmanuel Macron has announced that France would block a delay to Brexit unless it had a “clear objective” based on a “new choice” by the British. Additionally, the Spanish Prime Minister Pedro Sanchez warned that Theresa May would merely be “prolonging uncertainty” by requesting a short Brexit delay without a realistic plan. The warnings from EU leaders suggest that the bloc is growing exasperated over Theresa May’s handling of negotiations and would impose conditions on any extension, given that approval of a Brexit delay would require a unanimous vote from the EU27.
According to reports, senior EU insiders put the chance of the UK crashing out without a deal at “more than 50%” and would be open to delaying Brexit until 2021 as opposed to the few months suggested by the UK Government. Brussels are unconvinced that the “short, limited” extension will actually be as short and limited as proposed, with no confirmation that a short extension could resolve the gridlock in UK Parliament. Replacing the 21-month transition period with extra time as a member state would allow the UK and EU to develop their plans for the future relationship with the aim of making the contentious Irish backstop redundant.
Although the plan to delay Brexit by 21-months sounds explosive, the reality is not as controversial as it sounds. Under May’s deal, the UK will officially leave the EU on 29th March, but will remain in the Single Market and Customs Union until December 2020. The UK will also continue to participate in several EU agencies and will pay the divorce bill of £39bn to cover our EU spending commitments to the end of 2020. In other words, retaining most of the benefits of being a full EU member but without any voting rights. By delaying Brexit until 2021, it could remove the need for a backstop on the Irish border, as it is likely that either a free trade deal or the necessary technological infrastructure would be ready by then.
Nor Way!!!
Norway’s sovereign wealth fund, estimated at around £740 billion, announced this week that it is increasing its exposure to British companies, property and bonds regardless of the Brexit outcome. While the value of Norway’s current £62bn investment into the UK saw a reduction of 12% this year, this will give evidence to arguments that the potential economic damages of Brexit will only impact the UK in the short term.
While this news is undoubtedly encouraging, it should not be taken as a sign that Brexit will have no impact on our long-term economic future. Government forecasts still estimate the UK economy to grow slower than it would do if we remained an EU member. However, Norway believes that the UK will remain an attractive option for foreign investors.
Upcoming Key Dates
- 12th March: Second meaningful vote due.
- 13th March: Spring Statement / Parliament vote on whether Britain should leave 29 March without a deal.
- 14th March: Parliament vote for an extension if no-deal is rejected.
- 22nd March: One week until Brexit
- 29th March 2019: UK planned exit from the European Union
- 30th March 2019: UK planned transition period.
- 31st December 2020: UK planned exit from the transition agreement
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