European Parliament approved that Brexit would be extended further to October 31, from April 12. It is possible for the UK to leave earlier should the UK Parliament approve a Withdrawal Agreement (the deal). A review of the situation would take place in June so as to check if the UK has held its part of EU parliamentary election properly. The arrangement appears a compromise between the EU members who opted for a longer delay until December 31 and French President Emmanuel Macron who preferred a short extension. While this arrangement offers temporary relief to the market as the UK avoids leaving the EU without a deal this month, the risk of no-deal Brexit is still not eliminated.

Cross Party Talks

For the six months ahead, UK PM Theresa May would continue to get a deal approved in the UK Parliament, although she got defeated for three times in the meaningful vote over the past months. Although the margin of rejection has been declining, it remains uncertain that whether a deal would be approved before the October deadline. The cross-party talk between the Labors and the Conservatives are closely- watched. Yet, it is difficult to get a compromise between the former and the Brexit hardliners of the latter. We doubt if the Brexit hardliners would accept Labors’ request to stay in the Customs Union permanently. Meanwhile, Labors’ leader Jeremy Corbyn might find the refusal to form an alliance with the Conservatives politically favorable.

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PM May’s Departure and General Election

PM May promises to step down after completing the first phase (Withdrawal Agreement) of the Brexit negotiation. She probably has a few more months; buffer with the extension arrangement. However, calls for her resignation could intensify if the deadlock continues. According to YouGov polls, 48% of Conservative voters believe a ‘no deal’ Brexit is a good outcome. It appears likely that May’s successor could be Eurosceptic. This would heighten market volatility.

Another possibility is early general election, which could be triggered in two ways. First, the Commons votes for a new election. This required at least two-thirds of the House vote for a dissolution. Second, there is a vote of no confidence in the Government. Yet, a general election is by no means a guarantee to unlock the deadlock. Opinion polls show that support for conservatives is falling while that Labors is climbing up slowing. However, neither party is strong enough to gain majority in the Parliament. Meanwhile, the local council elections on May 2, as well as the European Parliament elections on May 23 might offer us insight to the political spectrum of the new Parliament (in case of an early election,

Second Referendum

A second referendum is time-wise feasible as the minimum time to pass the legislation, complete question testing and hold a campaign is about 22 weeks. The key is whether PM May would prefer this option as “no Brexit” would probably be one of choices in the referendum question.

Although the MPs have recently rejected all alternatives to the deal, they have also voted down the possibility of leaving the EU without a deal! This is why we refrain from overly concerned about the case of no deal Brexit. While the risk of no-deal Brexit is not eliminated, the possibility is not high. In an extreme scenario, the MPs can decide to revoke Article 50. Indeed, 191 MPs voted in favor of this option in the last round of “indicative votes”. More might go for this if all other windows are closed.

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