UK faces big Brexit week ahead

MPs are making final preparations for the forthcoming votes on whether to accept Theresa May’s Brexit deal, or potentially extend the talks process beyond March 29. Unless one of these paths is chosen, or Article 50 is revoked, the United Kingdom is heading for the unchartered territory of a no-deal exit which could upend Westminster politics, again, and tip the economy into recession.

Ironically, there is probably a majority in the House of Commons against a no-deal. In January, for instance, a non-binding amendment sponsored by Conservative MP Caroline Spelman and Labour MP Jack Dromey was approved which “rejects the United Kingdom leaving the EU without a withdrawal agreement and future framework for the future relationship”.

However, the big problem facing those many MPs who want to avoid a no-deal is that they can’t just show there is a majority in the House of Commons against no deal. They need to prove there is a majority in favour of an alternative outcome which has proven elusive so far.

With the stakes in play growing by the day, and a thick Brexit fog still over Parliament, there is only one current certainty with the UK’s exit. Enshrined in the UK’s EU Withdrawal Act, the default position legally is that the nation will depart the Brussels-based club on March 29 whether a withdrawal deal is agreed or not.

Throughout much of 2017 and 2018, the prospects of crashing out of the EU with no-deal where widely dismissed, including by the UK Government itself. However, to the horror of many MPs, this scenario remains a significant possibility and this month the May team published analysis of what this would mean for the nation.

This document forecasts that the economy would be 6-9 per cent smaller over the next 15 years than it would otherwise be under EU membership. As the document asserted, whatever these longer term impacts might be, it is the short-term term challenge that could be particularly intense, hence why the Bank of England has asserted that the nation could tip into recession.

While the impact of no deal would probably not be favourable for any part of the United Kingdom, it could have significantly differential impacts for competing sectors of the economy, and countries. The Government document, for instance, asserts that it is Northern Ireland and the North East of England that could be worst hit, economically, by a no deal.

The term no deal is, even now, widely misunderstood by much of the UK public, let alone international audiences. It would mean that London will automatically leave the EU without many of the rules that regulate the UK’s relationships with the EU.

And, also, many economic relationships with the rest of the world too will be undermined as these are underpinned by trade treaties that the Brussels-based club has agreed with key nations from Canada to Japan. With March 29 approaching fast, less than a quarter of 40 planned post-Brexit trade agreements have so far been signed.

A common error held by some is that there is only one no-deal outcome, when there are in fact plausibly multiple no-deal scenarios. At the extreme end of the spectrum is a chaotic no deal Brexit whereby negotiations between Brussels and London break down acrimoniously.

A version of this chaotic option, even now, seems unlikely, but cannot be completely dismissed. What the UK Government sought to emphasise in its document last week therefore is the range of measures it has underway to try to cushion the blow of a no-deal.

This includes unilateral UK action to maintain as much continuity as possible, including granting road hauliers from the EU-27 the ability to use their licences in the UK after March 29. The Government is also working to bring into force a number of agreements in critical areas, like aviation and civil nuclear cooperation and safeguarding, that would otherwise fall away with a no deal exit.

It remains unclear, if a no deal exit does come to pass, what the full scope of measures might be from the EU side to cushion the blow. Given the massive political time and capital put in by both sides into trying to reach a withdrawal agreement within the Article 50 timeframe, a no-deal outcome will generate significant acrimony and there will be a lot of posturing and finger pointing over which side is to blame which could lead to a breakdown in trust.

If May’s withdrawal deal is voted down again early this week, the best way for MPs to head off the prospects of a no deal in the immediate term will be to vote afterward to extend the Article 50 period. There are growing signs that this could happen, including the clear majority earlier this month for an amendment sponsored by Labour MP Yvette Cooper to ensure that May follows through on her verbal commitment to a potential vote this week to potentially extend the March 29 leave date.

However, if Parliament ultimately does not back Article 50 extension, and May’s deal cannot be passed either, the political consequences of no deal could be very significant for what is already a febrile UK political landscape. This includes for the governing Conservative Party given that some Cabinet ministers have threatened in this scenario to leave the Government, and other backbench Conservative MPs leave the party which increases the prospects of a general election or further referendum.

Taken overall, the forthcoming votes could therefore prove to be the last chance saloon to prevent a no-deal Brexit. The big challenge facing those many MPs who want to avoid this scenario is cultivating a majority in favour of an alternative outcome which has proven elusive so far in the long-running EU exit saga.

Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics