Despite the strongest protestations from Theresa May, political reality finally set in this week. There is currently no parliamentary majority for no deal. To prove the point, multiple Government ministers made clear that in the event the Prime Minister did not give Parliament the option to prevent no deal, they would support amendments that would do so. In a previous article we had stated that game theory would dictate that an A50 extension would be inevitable. Two months later, using the same logic, what now should we expect?

  • With the UK now ruling out no deal as an option, the EU is even less likely to give ground on the primary request of the brexiters, to change the terms of the backstop agreement.
  • The DUP are unlikely to pursue any outcome which leads to either a separation in treatment between Northern Ireland and the UK, or leads to greater support for unification. For this reason, they will be unlikely to support any deal proposed by Theresa May.
  • However, the majority of the Conservative Party will probably back the deal proposed by Theresa May. The number one fear now facing hardliners in the ERG is that the UK ends up not leaving at all and this deal constitutes their only chance to leave. Therefore expect the majority of this caucus to vote with the Government.
  • There will also be a sizeable contingent of Labour MPs who will support the deal, on the basis that the democratic voice of the people must be heard.
  • However, this is unlikely to be enough to enable Theresa May to pass her deal, so what then?

At the point her deal is then refused, expect Parliament to move to instruct the executive to seek an extension of A50. This however remember is not an obligation for the EU and actually requires unanimous approval. The latest noise emerging from Brussels is that there is no will for there to be more concessions granted only for Parliament to then refuse those too. Similarly it is seen as pointless to grant an extension purely for the sake of delaying the inevitable. i.e. if the UK can’t agree a deal, then just deal with it now.

Therefore what is most likely for the EU to propose is the following:

  • The EU offers an A50 extension to the Uk to last until December 31, 2021, so until the end of the multi-year budgetary framework. This means the UK remains a member for the duration of the current budget cycle and leaves before the next budget cycle commences. This eliminates a lot of the pre-existing drama around the UK paying into the EU budget without being a member. This also means there is sufficient time to finalise an agreement with the UK that fully addresses all outstanding issues.
  • In order to avoid a situation where Parliament then rejects the deal agreed, this extension is authorised on the basis of the UK offering the British public another referendum. On that basis, the referendum would be the UK/EU deal as agreed or remain.
  • They are unlikely to make their offer to the UK until the last minute, which could in fact be the last few days of March.

With that in mind, what is likely is that with days left before the UK leaves the EU, it will have a choice. Leave without a deal, or accept the EU’s offer. What happens then, no one knows.

James Chaplin
@James_A_Chaplin
CEO

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