Brexit Updates

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16th May
Talks between the government and the Labour Party to find a compromise appear to have stalled. The main sticking point remains a customs union with the EU, which is a compromise that the Labour party are seeking, but that the current government are probably unable to deliver.

Any faint hope of progress is now further stifled by the internal battle to replace the Theresa May. The Prime Minister has come under mounting pressure to either resign or name the date she intends to go. In response, she has stated she will announce a timetable for stepping down after parliament votes on the EU Withdrawal Agreement Bill (WAB). We now expect what authority the Prime Minister had left to disappear.

This also means that the Conservative Party leadership election will now take precedence over any Brexit negotiations with either the Labour Party or the EU. This, in turn, could lead to the government forced to seek a further extension or to push for a Hard Brexit. The other option is for the new leader and Prime Minister to call a general election as a means of securing a majority in parliament, but this is a risky strategy.

The EU Withdrawal Agreement Bill (WAB) is part of the formal process of leaving the EU - it puts into law the withdrawal agreement negotiated between the EU and the UK. But, as parliament is unable to decide how to leave - it is a bit like going through the motions of buying a house - without knowing which house you intend the buy, or how much it will cost.

According to recent polls, both the Conservatives and Labour are heading for sizeable defeats in the European elections. This also leaves the rest of Europe with the prospect of anti-Europe, far-right parties taking seats in the European Parliament.

From Europe, there is a timely interview with Angela Merkel discussing why European unity is essential, and why grouping together protects against the actions of Russia, America and China.

1st April
The indicative votes process continues with either a customs union or a new referendum the two front runners. (That our politics now sound like the Grand National, shows how desperate the situation has become.) The government will not want either choice as would split the Conservative Party further. There are now rumours swirling that the government will call a snap election this week to frustrate the current process and to hang on for a little longer. However, we would expect many Conservative MPs and ministers would oppose another election with the Prime Minister leading it.

29th March
Parliament will today vote on a variation of the withdrawal agreement. The government has removed the political declaration from the withdrawal agreement. The government has done this partly to meet the Speaker's ruling that the vote should be for something substantially different to the previous votes - both of which suffered substantial losses. The government is still unlikely to win this amended vote as the DUP, the Labour Party and some hardline Brexit supporters have already stated they will not vote for it. This amended vote still includes the backstop provisions - this alone will stop the DUP voting for it. We expect the indicative votes process to continue on Monday and if a majority can be found this new majority view would be put to the EU. A soft Brexit is therefore currently more likely than a hard Brexit - but like everything in this process, it could change at any moment. However, overall the government has failed to deliver the Brexit promised in the referendum, but this is because that Brexit was and continues to be a fiction.

This is after all the day we were supposed to leave the EU, but we are really no closer than we were on the day after the referendum, almost three years ago.

28th March
The Prime Minister has announced her intention to stand down if her deal is approved by parliament. However, the DUP has stated that they will not back the deal - this means that the government is reliant upon enough Labour MPs in strong Leave constituencies voting for the deal.

None of the options proposed under the new Indicative Votes system was approved last night, though some came close. The Ken Clarke plan for a customs union with the EU, (a soft Brexit option) lost by only 8 votes. The Kyle and Wilson plan for a second confirmatory referendum vote on any agreed deal lost by just 27 votes. Even though the government stated, this showed the indicative votes system was a failure it is important to remember that the government has been defeated by 230 and 149 votes on its meaningful vote.

The government is expected to bring back their meaningful vote for the last time on Friday 29th March or Monday 1st April. However, the Speaker has already restated that the deal needs to be substantially different for it to be brought back again. We do not believe that changing the leave date constitutes a substantial change. However, that said we would like to see a third meaningful vote - so that it can then be defeated again - and then real alternatives can be sort. We would expect the Prime Minister to resign soon after the vote, (assuming it is lost) - though there is no guarantee of this. We believe that a caretaker Prime Minister would be the better option. Assuming the third vote is lost the government will have to return to the EU to ask for a much longer extension, realistically this would need to be 12 months or more. The longer the extension period, the greater the chance of a soft Brexit or a second referendum.

It is important to remember that this is just the withdrawal stage; the actual trade negotiations with the EU are bound to be more protracted and possibly more acrimonious. The trade negotiations can only commence once we have signed a withdrawal agreement.

21st March
The Prime Minister is in Brussels to seek a short technical extension to the Brexit leave date. However, the other EU leaders could be reluctant to agree to this, as they do not see a break in the current UK political impasse. A short extension is more likely to work if there is actual movement in the UK government's position. The backstop remains an issue and looks unlikely to be resolved. Therefore, movement in the other direction by seeking a softer Brexit would bring more MPs to vote for the deal. However, it is unlikely that this can be formulated and agreed within a three-month timeframe. A longer extension seems to be the best way to break the deadlock and make progress. It may be that the EU refuses a short extension and only offers a longer extension.

20th March
The government has announced that it will only seek a short extension to the leave date - extending it from 29th March to 30 June. The government has also stated it will bring the same deal back to parliament to vote on it, possibly next week. It will then be for the House of Commons Speaker to rule whether the deal is substantially different and can be voted on, or the same - in which case it cannot be voted on again. This looks like a continuation of the government policy of applying more pressure to get their deal agreed, the pressure is being applied to MPs and now the Speaker.

In response to the request for a short extension, the French government has now indicated that it will oppose any such extension. For the EU to grant an extension, all EU members must agree to it.

The default leave date of 29th March remains unchanged. As it currently stands a Hard Brexit now appears more likely.

19th March
The House of Commons Speaker John Bercow made a surprise ruling yesterday that the government can only bring another "meaningful vote" if the terms of their proposed deal have substantial changes to it. The convention that parliament should not vote on the same motion if it has been defeated dates from 1604. The limit applies to the same session of parliament, so in theory, Parliament could be dissolved and then restarted and the third vote then undertaken - though this is unlikely, as it would be seen as an abuse of process.

This ruling has now prevented the government from running down the clock, (always the plan). It also does not rule anything out - Hard Brexit, Soft Brexit or No Brexit. However, the default leave date of 29th March remains, so if nothing happens to change this, the UK will leave as previously agreed by parliament. The more likely outcome of this ruling is that the government will have to ask the EU for a significant delay, this could be months or even years. We are in this situation because the government has refused to negotiate an agreed settlement with parliament.

The 29th of March leave date can be altered or removed by statutory instrument - otherwise, it will still apply. However, this process will probably only be carried out once the government has agreed a period of delay with the EU.

The government has stated that a third meaningful vote could occur next week, if and when the government secures a delay to Brexit from the EU. To be clear we do not believe that a delay to Brexit alters the actual terms of the negotiated deal - the deal would remain substantially the same. A delay would not alter the deal sufficiently to warrant a third vote. Furthermore, an agreed delay would take the pressure off to agree to the current deal and allow time in parliament for an alternative deal to be found - this would likely be a softer form of Brexit. However, the risk of taking this route is that there then appears to be little reason to leave the EU, as the UK would remain subject to all EU laws - without any say in them.


14th March
Parliament is likely to vote to seek an extension to Article 50 to prevent a Hard Brexit on 29th March. The EU is expected to grant an extension; however, all 27 members need to agree on this. Given the state of confusion and uncertainty, the EU will want to give time to see what emerges. Our view on this is that an extension of 2-3 months will not be sufficient to reach a consensus in parliament or the country. If the extension period is substantial or even open-ended, this will increase the political pressure for either a second referendum or even a general election. In this situation, we would expect the government to allow for a second referendum, rather than risk losing a general election. However, as the EU has already stated they would only grant an extension for a particular purpose. So it may be that the government agree to a second referendum and the EU agree to a substantial extension for this to take place, the extension would need to be approximately 12 months.

However, the government appears to be seeking only a short "technical extension" to Article 50. The reason for this is to keep the current deal negotiated with the EU on the table. The government looks likely to bring the deal back to parliament early next week (18th March onwards). The tactic appears to be to say to those seeking a Hard Brexit - agree this deal or risk no Brexit at all.

As it currently stands the choice appears to be between a Hard Brexit, (and the economic risks that this may cause) and the current deal, (which is not very good for the UK). It is also important to remember that detailed trade talks with the EU will only begin once this, or another deal has been signed.


13th March
Parliament will today vote whether to remove Hard Brexit as an option, or whether to endorse a Hard Brexit. We expect a majority will vote to remove Hard Brexit as an option. However, if this happens the Withdrawal Act 2018 will need to be amended to remove or amend the leave date of 29th March - as this currently stands as the default.

Result - Parliament effectively voted twice to remove a Hard Brexit, however, these votes are not binding on the government. The government can take note of them, but will, in reality, ignore them.


12th March
The Attorney General's advice regarding the backstop arrangements for the Irish border has not changed. The risk of the UK becoming stuck in a protracted or almost permanent customs union with the EU remains.

The advice is published here: https://assets.publishing.service.gov.uk The only clauses that need to be read are clauses 15 & 19.

As a result of this advice, we expect the government to lose the vote this evening. However, we expect the loss to be less than the previous vote, though still significant. The result of the vote was a Government defeat by a majority of 149 votes.


Practical Options
The more practical options are now:

1. A Soft Brexit with the UK remaining in the customs union and accepting the right of free movement as that would be integral.

2. A second referendum to decide the matter again. Ironically, this may be the best bet for those seeking a Hard Brexit as it gives them time to regroup and re-run the first campaign.

However, given the continuing uncertainty businesses do need to plan for - more uncertainty. Though as it currently stands a Hard Brexit is looking less likely.


Longer Term
As currently stands Brexit is still more likely to happen, than not. Assuming that it goes ahead we expect trade deals to proceed, these will take time and will not be as advantageous to the UK and those deals the UK currently has through EU membership - this is just a reality of bargaining power.

Once the deal with the EU is signed we do expect to see the economy improve over the short-term. However, the long-term economic growth will be less than the UK would have if still a member of the EU.

The political implications of Brexit will substantially increase the chances of Scotland holding another independence referendum, (with an increased likelihood of success). Furthermore, we expect at some point within the next ten years for Northern Ireland to hold a "border poll" regarding becoming part of the Republic of Ireland, basically a united Ireland. We see these an inevitable political and constitutional consequences of Brexit.

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