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New Brexit Date Set for 31 January 2020, with UK Elections to Take Place on 12 December 2019

After being forced to break his pledge to bring the UK out of the EU by 31 October 2019, the UK Prime Minister was obliged to accept an extension to Brexit until 31 January 2020. In response to this, the Prime Minister has successfully, after several previous failed attempts, passed legislation for an election to take place on 12 December where voters will be asked to break the Brexit deadlock. The different UK political parties plan to put forth their ideas on the future direction that Brexit should take, including leaving with the Prime Minister’s new deal, holding a second referendum, leaving with no deal, and even cancelling Brexit altogether.

On Tuesday 29 October, UK MPs finally broke the parliamentary deadlock by allowing for a general election to take place. Approval was secured when the main opposition party, the Labour Party, and other opposition parties, after rejecting the notion of a general election on three previous occasions, withdrew their objections to an election once it was confirmed that the EU had granted an extension to Brexit until 31 January 2020. The European Council President Donald Tusk described the extension as a "flextension", meaning that the UK could leave before the deadline if a deal was approved by Parliament.

Hong Kong traders will want to note that while the EU and UK have agreed to negotiate a free-trade agreement as part of the Prime Minister’s new Brexit deal, Michel Barnier, the main Brexit negotiator for the EU, stated that tariff and quota-free access to the EU were linked to maintaining regulatory standards. Barnier warned that the UK would face a “proportional” response from the EU if it attempted to lower social, environmental and consumer standards. Therefore, even though the EU would be ready to launch trade negotiations with the UK “the day after” the withdrawal agreement was ratified, any free trade agreement would be linked to a “level playing field” between the EU and the UK.

Additionally, Barnier stated that European leaders were impatient to end “this negative negotiation of separation and divorce and to open a new page on the future relations”, but that “due to the British political situation we are obliged to be patient”. With a general election looming and the UK Parliament expected to dissolve on Wednesday 6 November 2019, once the House of Lords passes the legislation, any substantive progress on Brexit is unlikely to happen until next year.

The leader of the Labour Party, Jeremy Corbyn, described the election as a “once-in-a-generation chance to transform our country” and declared that his party was ready for an election. He stated that “we want to be able to say to the people of this country there is an alternative … to sweetheart trade deals with Donald Trump”. Meanwhile, Prime Minister Boris Johnson declared that “we are left with no choice but to go to the country to break free from this impasse”. He called for a “new and revitalised” parliament to take the UK out of the EU but also stated that it would be “a tough election, but we will do the best we can”, and put the blame for an election on opposition parties due to their refusal to ratify his Brexit deal.

In an attempt to unite his party, the Prime Minister allowed the readmission of ten of the twenty-one MPs that had been expelled from the Conservative Party for voting against his Brexit plan in September.

The major political battles will be fought over the future direction of Brexit. The Conservative Party is expected to campaign on getting Brexit done with the Prime Minister’s new negotiated deal with the EU, whereas the Labour Party appears to be promising a second referendum on Brexit in order to let the people resolve the question of Brexit (this “promise” was set out during the annual conference of the Labour Party in September 2019). Additionally, the smaller opposition parties are expected to have an effect on the election. One such party is the Brexit Party led by Nigel Farage, who is a significant campaigner for a hard Brexit to take place; his party is seeking to outmanoeuvre the Conservative Party by arguing for a no-deal Brexit. On the “pro-remain” side are the Liberal Democrats who are seeking to attract remain voters from the Labour Party by pledging to prevent Brexit altogether. To this effect, the Liberal Democrats have been in discussions with the other, smaller pro-remain parties to not compete with one another in order to maximise their chances.

In short, Hong Kong traders should be aware that the UK is bracing for a complex and volatile general election on 12 December. Despite the recent progress of achieving a new withdrawal agreement with the EU as well as the UK Parliament pronouncing its approval on a Brexit deal for the first time on 22 October, developments have returned the current state of affairs into more uncertainty since then. Indeed, the only certainty is that the UK will be remaining in the EU beyond the previously agreed departure date of 31 October.

Content provided by Picture: HKTDC Research
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