Brexit: Back To Brussels … Again …

A better day for the PM

Another tumultuous day in Brexit land concluded with Parliament voting in favour of sending Theresa May back to Brussels to get a “better” withdrawal deal. In another rare victory for the Prime Minister, amendments that would have given Parliament the power to delay Brexit (by extending Article 50) if a no deal Brexit appeared likely, were voted down.

The result is that in the coming days the Prime Minister will be seeking a “significant and legally binding change” on the Northern Ireland backstop that would prevent the UK being tied indefinitely to EU rules. New wording that facilitates this would then be put before the UK parliament with the expectation that this would pass and Brexit could proceed. But with the EU refusing to countenance a situation that could potentially lead to a “hard” Irish border, requiring customs and regulatory checks on goods and possibly passport checks for people, it will be challenging to say the very least.

The EU remains united

Optimists in the British government suggest that this is the public position of the EU and privately there are hints of movement, but the EU has proved to be remarkably united so far and there is no reason for this to change just yet. Sabine Weyland, the deputy chief EU Brexit negotiator has been unequivocal, stating “we’re not going to reopen the agreement”. Moreover, there is the risk that if the EU were to agree to re-open discussions, they could actually come back with their own demands of concessions on other areas that the UK may need to make, such as fishing rights.

What next?

The next step is for Parliament to vote on what the PM returns with from Brussels by February 14. If the Prime Minister fails to get changes on the withdrawal agreement then this will again open up the possibility for amendments that offer the opportunity for altering the course of Brexit with Article 50 extensions and potential parliamentary votes on alternatives, such as a “softer” Norway style agreement or even a second referendum. However, the risk remains that politicians still haven’t coalesced around a plan of action for Brexit and the uncertainty continues. We also have to remember the EU needs to agree to it too. This uncertainty will ensure sterling continues to struggle in the coming days and weeks, business contingency plans intensify (diverting attention away from growth opportunities) and the prospect of any Bank of England monetary policy tightening further recedes.

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