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Uncertainty Increases Over Likelihood of Orderly Brexit with UK Running Out of Workable Options

On 27 March 2019, the road to Brexit took another dizzying turn, with a number of “indicative votes” defeated in the House of Commons. On the same day, Theresa May also stated that she would resign her prime ministership (as she is being exhorted to do, by mainly enraged Brexiteers within her own party) if her Withdrawal Agreement were to be approved in a Third Meaningful Vote (“MV3”). Yet, before her announcement, the speaker of the house, John Bercow, re-emphasised to all MPs that he would not allow the MV3 unless it was substantially different from the already-held MV1 and MV2.

Hong Kong companies wishing to continue trading in the UK with the least turbulence possible may be alarmed at this new turn of events, with uncertainty growing ever more apparent over the whole Brexit saga. The MV3, if it is held and won, will allow a transition period until 22 May for the UK to pass the necessary legislation for an orderly Brexit. After that a transition period will set in, while the EU and UK decide on their future long-term relationship.

If there is no MV3, or if it is voted on and defeated, then the UK must decide on the next steps by 12 April, or else face the certainty of a hard Brexit. It came to light, also on 27 March, that the Democratic Unionist Party (which Theresa May relies upon for their support) will not back the MV3 if it comes back for a vote. It therefore now looks even more unlikely that Theresa May’s deal could get enough votes to pass.

Earlier in the week, MPs wrested control from the Government by voting in favour of allowing a number of so-called indicative votes, hoping to thereby gain a majority view on one or more alternative plans to Theresa May’s MV3. Even though all eight votes – held on 27 March – were lost, Sir Oliver Letwin, the MP responsible for the indicative votes idea, said in the House of Commons – immediately after the results were read out – that while disappointing, this had been expected. According to him, all is still not lost: the indicative votes are intended to be a “two-step process” that would deliver more decisive support for some of the proposals in a second day of voting on Monday 1 April, which Speaker John Bercow has allowed. The eight proposals voted on are as follows:

1. No-deal Brexit - Leave the EU on 12 April without a deal.

2. Common Market 2.0 - The UK joins the European Economic Area (EEA) and negotiates a temporary customs union until alternative arrangements can be found.

3. EFTA/EEA - Similar to Common Market 2.0 but rejecting any kind of customs union with the EU.

4. A customs union with the EU.

5. A customs union with the EU and "close alignment" with the single market.

6. Revoke Article 50, i.e., cancel Brexit, if the UK gets to 10 April without a deal. In this scenario, MPs would be asked to vote on a no-deal exit and if they rejected that, Article 50 would be revoked by the 12 April deadline.

7. A confirmatory public vote, whereby parliament cannot ratify or implement any agreement on the UK's withdrawal and future relationship “unless and until they have been approved by the people of the UK in a confirmatory public ballot” (essentially, a second referendum).

8. Malthouse Plan B, which would allow the UK to make its budgetary contributions to the EU up to the end of 2020, and agree a period of two years with the EU in which UK goods have full access to the EU.

The highest number of votes from the eight proposals was the one for a confirmatory public vote (no. 7 above). It was supported by 268 MPs, while opposed by 295. The second most favoured proposal was the one for a “customs union” (no. 4 above). It achieved 264 votes in favour and 272 against, failing by a mere eight votes.

The burning question remains: where does one go from here? The UK Government is apparently still lacking a “Plan B”, and Sir Oliver Letwin has predicted (probably correctly), on 28 March, that a no-deal on 12 April is the “most likely” scenario, unless MPs back the Prime Minister’s deal, or an alternative. He stated on BBC Radio 4’s Today programme that “at the moment we are heading for a situation where, under the law, we leave without a deal on the 12th [of April], which many of us think is not a good solution, and the question is ‘Is parliament on Monday [1 April] willing to come to any view in the majority about a way forward which doesn’t involve that result?’” In other words, there is lingering hope still that among the indicative votes to be held again on 1 April (and it is not clear whether all eight will be held again, or only some of them) a majority view may still be formed, which could help decide the path to an orderly Brexit.

There is also the possibility of a general election being called by the Government, before 12 April. Such a move could result in the EU being asked for a longer delay, possibly of one year, before Article 50 (the exit date) is finally triggered. The European Council President, Donald Tusk, has signalled that such a delay might well be allowed (although all Member States would have to unanimously agree to it). The election would then bring in a fresh parliament, with the possibility of a majority in favour of a workable plan.

Content provided by Picture: HKTDC Research
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