Analysis

Brexit deal: political turmoil, little change for business

  • Europe
  • United Kingdom
Alexandra Kellert

Alexandra Kellert

Brexit deal: political turmoil, little change for business


The UK and the EU on 13 November agreed the text of an agreement on the terms under which the UK will leave the EU, planned for 29 March 2019. The following day, Prime Minister Theresa May received the approval of her cabinet for the deal at a five-hour meeting that reportedly saw a number of opposing voices heard. An emergency European Council summit will now be held on 25 November for European heads of government to sign off on the deal (likely to be a formality). The UK parliament will then vote on whether to accept the deal, likely on 10 December.

 
British politics in the coming days will appear extremely chaotic. The cabinet resignations have already started, including Brexit Secretary Dominic Raab, and are likely to continue. But, with May having officially received cabinet approval for the deal, those who resign are doing so in an attempt to protect their own political careers – by disassociating themselves from an agreement that they believe will be unpopular with voters – rather than in the hope of changing government policy.

What happens next

May has made it clear that the options open to the UK are her deal, no deal or no Brexit. However, in reality, May is not prepared to offer an option to the electorate to allow them to reverse the result of the 2016 referendum, leaving the UK with two options: deal or no deal.

At the moment, it looks on paper as though May does not have the votes to get the agreement passed in parliament. However, this has been the case in previous votes on the Brexit process that May has managed to win. Many moderate MPs are likely to feel that the deal is better than leaving the EU without the parachute of an agreement, and this is likely to concentrate minds when it comes to the vote. May is likely to lose votes on her benches from the hard-line Brexit ideologues, but also to pick up some from those among the opposition who realise that this is as good as the deal is going to get.

What is currently unclear is whether the numbers of these dissenters will be enough to thwart the passing of the deal. If the deal passes, the UK will leave the EU in March 2019 and enter a transition period until at least December 2020, during which it will negotiate a future relationship. If May loses the vote then she will almost certainly have to stand down or face a vote of no confidence. What happens after that would depend on who takes her place and whether the opposition can force a government collapse. There would be time to avoid a no-deal exit, but, unless a viable alternative were proposed – reopening negotiations and/or extending the Brexit deadline – that would be the default option. A new referendum on Brexit remains unlikely as long as the Conservatives are in power, but would become much more credible if the government falls.

What it means for businesses

The events of the past few days should not significantly alter how businesses are approaching Brexit. The likelihood of a no-deal Brexit has slightly reduced as a result of the withdrawal agreement text being finalised. However, the possibility of the deal being voted down by the UK parliament means that a no-deal scenario is still credible and businesses should continue to prepare for it. The potential for supply-chain disruption and delays at the border are just two of the issues that companies should take into consideration when planning for 2019.

Even if no-deal is avoided, uncertainty over the future operating environment in the UK will persist for at least the next two years, and most likely longer. Companies with any kind of link to the UK will need to carry on thinking about how Brexit will affect them for several years yet.

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