Today’s meaningful vote was expected to be the point where some certainty about Brexit finally emerged, but with the Prime Minister’s withdrawal agreement looking very likely to be defeated, the uncertainty will continue. All options from no deal at all through to cancellation of Brexit are in play and it’s difficult to predict when an agreement on the way forward will be reached within the UK political system. Given that an exit from the EU with no deal could now happen in little more than two months, planning to minimise possible disruption should now be an urgent priority for all affected businesses.
Today’s vote in Parliament
Today is a milestone moment in the Brexit process.
MPs will begin voting at around 7pm on whether to accept the negotiated EU withdrawal deal put forward by the Prime Minister, but with many of her own MPs expected to join opposition parties to vote against the deal, it is widely expected to be defeated.
If the deal is rejected by MPs, the path ahead becomes unclear. The Prime Minister has repeatedly insisted that a vote against her deal will mean that the UK will leave the EU on 29 March 2019 with no withdrawal agreement, transition period or bridging measures whatsoever. Many MPs – possibly a majority – are determined to prevent this scenario, but it remains unclear whether Parliament will be able to unite and exercise sufficient power to oppose a no-deal exit. These are extraordinary times in which the UK’s constitution is being tested to the limit and re-shaped, and no-one knows what might or might not be possible.
The first Parliamentary attempt to prevent no-deal will centre around whatever the Prime Minister brings back as a ‘Plan B’, probably on Monday 21 January. If defeated today, she will be hoping that she can simply bring back the same deal in substance, but with additional concessions and reassurances from the EU, perhaps around the Irish border and backstop issues. Since she is unlikely to obtain significant changes from EU leaders, having already spent a month trying following her previous delay of the vote, a second attempt to unite MPs behind her deal appears unlikely to succeed; however, some Labour MPs have indicated that there may be deals to be done, with the Government supporting elements of Labour policy in exchange for their support on Brexit. Other groups within Parliament are proposing different approaches.
Some senior Conservative backbenchers are seeking to give ministers another three weeks to get an amended plan through Parliament, before tasking the Liaison Committee (made up of the chairs of all Commons select committees) to draw up a compromise which MPs can vote on. Another cross-party group has published proposed legislation to hold a second referendum asking the question of whether the UK wants to leave the EU on the current proposed terms, or remain. Meanwhile the Labour leader has pledged to table a motion of no-confidence if the Prime Minister is defeated today, hoping to defeat the Government and prompt a General Election.
Much will depend on the scale of the likely defeat this evening.
A defeat by around 40 votes is likely to encourage the Prime Minister to dash to Brussels in search of concessions; 100 votes or more would see Labour hopes rise for a swift vote of no-confidence. Overwhelming defeat could even see the Prime Minister call a snap general election, against the will of her wider party. The only safe bet is on continued uncertainty for some time to come.
One way or another, the UK looks likely to request an extension to the 29 March deadline, and there are indications that the EU27 would be willing to grant this until at least July 2019 provided that the extension is requested in order to take definite steps to resolve the impasse, such as a referendum or General Election.
The key point to note is that Brexit proceeds automatically on 29 March with no deal unless Parliament agrees a deal or agrees to seek a delay or postponement. This is an unprecedented situation and nobody can predict the next steps with any confidence but the likely options look to be as follows:
- Withdrawal agreement is defeated and Parliament cannot agree on any other course of action: the UK leaves on 29 March without a deal or transition period
- Withdrawal agreement is eventually accepted: the UK leaves on 29 March and a transition period runs at least until December 2020, during which there is little change. A further “cliff-edge” awaits because many important aspects of the future relationship between the U.K. and the EU are not yet agreed, meaning that the next two years would be a continuation of the negotiation process that started when Article 50 was triggered in 2017.
- Article 50 notification is revoked and the UK does not leave: As ruled by the CJEU in late 2018, the UK can withdraw notification unilaterally, remaining within the EU without requiring the consent of the EU27.
- A vote of no confidence in the Government is passed, leading to a General Election: The EU is expected to agree to an extension of the Brexit deadline in this case; an election would be a delay to the process rather than a resolution as any new Government would have to deal with many of the same issues and uncertainties.
- Parliament votes for a referendum on the terms of the UK’s departure: A referendum could be structured in various ways but the available options would be some combination of withdrawal agreement, no deal or no Brexit. An Article 50 extension would probably be requested and granted.
Even if the withdrawal agreement ultimately passes, its main effect is to delay the ‘cliff edge’ of departure until the end of 2020 because many important aspects of the future relationship between the U.K. and the EU are not yet agreed. All other options other than outright revocation of Article 50 notification would also mean an extended period of uncertainty about the UK’s future relationship with the EU.
Business planning for Brexit
As can be seen, most outcomes following today’s vote will result in further uncertainty, but given the closeness of Brexit day on 29 March, waiting for further certainty before making contingency plans is an extremely risky option.
The normal advice for unstable economic times applies: try and reduce dependency on individual suppliers and customers, diversifying as far as possible; focus on collecting outstanding debts; consider carrying higher cash balances and stock levels than usual. On top of that, the particular challenges of Brexit mean that reviewing cross-border supply chains and access to staff is essential. The British Chambers of Commerce checklist is a helpful overview of points to think about. Another useful resource for industry-specific issues is the Government’s no-deal notices.
After today’s vote we will continue publishing further advice focused on mitigating specific business risks that could arise from Brexit. Please feel free to contact one of our team advising on Brexit or your usual PKF Francis Clark specialist if you would like advice and support on your Brexit planning.