U.K.: Breaking The Brexit Deadlock

Jan. 07, 2019 10:10 AM ET


  • 'No deal' remains the default Brexit scenario - unless MPs can unite around an alternative.
  • If the deal is voted down, MPs are likely to get a say on next steps.
  • A Brexit delay looks more likely - although this isn't challenge-free either.
  • The economy is beginning to suffer.

By James Smith, Developed Markets Economist at ING

The UK economy is beginning to stall as Prime Minister Theresa May prepares to hold a crunch vote on her deal in mid-January. This looks set to be rejected by MPs, potentially opening the door to either a second referendum or a push towards the 'Norway option'. Nobody truly knows what option will prevail, but some form of Brexit delay is becoming more likely

'No deal' remains the default Brexit scenario - unless MPs can unite around an alternative

As the new year begins, it's worth reminding ourselves that as things stand, the default legal position is that the UK will the leave the EU on 29 March without a deal, unless Parliament can unite around a particular alternative course of action. Nobody truly knows which (if any) particular option may ultimately command a majority amongst MPs, but there are a few main scenarios.

First off, there's the deal that the Prime Minister agreed with Brussels back in November and the fact remains that Theresa May faces a steep, uphill battle to get it approved by Parliament. A crucial vote on the agreement - which was dramatically postponed in mid-December - will take place on 14 January, and right now, it looks set to be rejected, potentially by a heavy margin.

Turning the tide will be tough - if not impossible - particularly given that the EU has made it clear it is not prepared to renegotiate. Back in December, Theresa May had hoped to win legal assurances that the contentious Irish backstop would never be needed, but the EU has made it clear this would render the agreement an invalid insurance policy against a hard border in Northern Ireland.

If the deal is voted down, MPs are likely to get a say

This article was written by

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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