Sarah Hewin, Chief Economist, Europe, Standard Chartered Bank explained that Brexit headlines hint at an imminent deal, but even if – a big ‘if’ – Prime Minister (PM) May can persuade her cabinet and win over sceptical EU leaders, the parliamentary vote remains uncertain.
Key Quotes:
“Pro-Leave members of parliament (MPs), pro-Remain MPs, Northern Ireland unionists (DUP) and the opposition all have reasons for voting down the deal.
The main holdup to agreeing a deal has been the ‘backstop’. PM May proposes that, until/unless there is a final agreement on the UK’s relations with the EU that takes care of the Irish border issue, the UK will stay in a customs union with the EU once the post-Brexit transition period ends. But this would make UK bilateral trade deals with other countries difficult. Some UK ministers want a time limit, which the EU has so far rejected. A separate backstop for Northern Ireland (NI) with regulatory checks between NI and the rest of the UK is opposed by the DUP.
The all-UK customs-union backstop is likely to come with strings attached, with the EU requiring a level playing field on rules relating to the environment, labour, tax and on state support for industry, with appropriate enforcement mechanisms. In addition, the EU is likely to press for other advantages, for example, access to UK fishing waters.
PM May’s aim to achieve a deal and parliamentary ratification before Christmas looks challenging, given unresolved issues and splits within the government. We think that parliament’s ‘meaningful vote’ may be delayed until the new year and may not pass at the first attempt – though it could subsequently be re-submitted. There is growing awareness of the damage that would be done by a no-deal outcome. There is also more vocal opposition to Brexit; a no deal threat – or reality – could be used to try to push through a second referendum. We see this as a low possibility, but not negligible.”
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