28 Feb

ABCC Brexit Update – 28 February 2019 - Theresa May Offers MPs Prospect of Delayed Brexit

 

Theresa May Offers MPs Prospect of Delayed Brexit

Summary

  • PM Theresa May continues efforts to pass an amended version of her Brexit deal through Parliament after losing an historic vote in the House of Commons in January.
  • Westminster has been shaken by the resignations of both Labour and Conservative Remain MPs, who have now formed a new parliamentary grouping, The Independent Group.
  • Both PM May and opposition Labour Leader Jeremy Corbyn have sought to avert further resignations, including those from Remain supporting members of the Cabinet. 
  • PM May announced 26 February she would offer MPs a vote on delaying Brexit or ruling out a ‘No Deal’ Brexit, if MPs again reject her deal during a ‘Meaningful Vote’ due to take place on 12 March.  
  • Germany's Angela Merkel responded to the developments saying that if more time were needed to get Parliament's approval, she would "not oppose" it.
  • In a significant boost for PM May, the leading Conservative Brexiteer Jacob Rees Mogg said he could back May’s deal even if changes are not made to the withdrawal agreement, amid growing fears that Remainers are trying to thwart Brexit.
  • Meanwhile, in a bid to stem the loss of further Remain supporting MPs, Labour leader Jeremy Corbyn has said he would support a second referendum to avert a ‘No Deal’ outcome.  The announcement has already been met with opposition from Brexit supporting Labour MPs.
  • Discussions between the UK and EU continue as they seek to find a compromise on the most contentious part of May’s Brexit Deal:  the Northern Irish Backstop.
  • As part of its campaign to inform the public and business community, HMG published its impact assessment of a No Deal outcome February 26.  The Australian government has also published advice to Australian businesses.
  • The UK continues to seek contingency agreements with non-EU trading partners, including Australia, Switzerland, the United States and others, should it leave the EU without a deal. 
  • With the prospect of a delayed Brexit and lowered imminent threat of a Hard Brexit on 29 March, the Pound Sterling hit a 21 month high against the Euro and reached $1.3239 USD, the highest level since the end of January.
  • 29 days remain until the UK is scheduled to leave the EU on 29 March 2019.

Another Turbulent Week in Westminster

PM Theresa May continues her efforts to pass an amended version of her Brexit deal through the House of Commons.  May was unable to pass her deal through the House on 15 January, forcing her to return to EU leaders to continue Brexit negotiations.

With the clock ticking to Brexit Day on 29 March, Westminster has been shaken by the resignations of both Labour and Conservative Remain-supporting MPs.  Three Conservative MPs (Heidi Allen, Anna Soubry and Dr Sarah Wallaston) followed eight Labour MPs in resigning from their parties to form the new parliamentary grouping, the Independent Group. 

The Labour MPs, who in addition to criticising Labour’s position on Brexit, condemned the Labour Party’s inability to address concerns over anti-Semitism within the party, include: Chuka Umunna, Luciana Berger, Chris Leslie, Angela Smith, Mike Gapes, Gavin Shuker, Ann Coffee and Joan Ryan.  The Independent Group, which has yet to become an official party, has the same number of MPs as the Liberal Democrats.

Further to these resignations, the week began with reports that members of her cabinet have threatened to resign if the Government does not rule out a No Deal Brexit and consider a delay to leaving the EU. 

May Offers MPs Prospect of Brexit Delay

Under growing pressure, both PM May and Labour leader Jeremy Corbyn have sought to avert further resignations within their respective parties.  Addressing the House of Commons on 26 February, PM May announced that should she lose a ‘Meaningful Vote’ on her deal on 12 March, she would offer MPs a vote on delaying Brexit (by seeking an extension to the EU’s Article 50 secession clause) or ruling out a ‘No Deal’ Brexit.  MPs will be offered two separate votes:

  • One, on the following day, on whether MPs support a ‘No Deal’ Brexit stating the UK would “only leave without a deal on 29 March if there is explicit consent in the House [of Commons] for that outcome”
  • If this vote fails, MPs will vote by 14 March to request an extension to the EU’s Article 50, the bloc’s secession clause, to delay Brexit beyond 29 March.

In an effort to avoid further splits within her party, May went on to say to the House, “Let me be clear, I do not want to see Article 50 extended…our absolute focus should be on working to get a deal and leaving on 29 March.” 

In a significant boost for PM May, the leading Conservative Brexiteer Jacob Rees Mogg said he could back May’s deal even if changes are not made to the withdrawal agreement, amid growing fears that Remainers are trying to thwart Brexit.

It is important to note that an extension to Article 50 would come through a formal request from the UK to other EU member states.  Any extension would require the full agreement of all EU member states and runs into the difficulty of the upcoming EU parliamentary elections in May.  If still a member of the EU, the UK would be required to take part in these elections and field candidates.

Responding to May’s announcement, Germany's Angela Merkel said that if more time were needed to get Parliament's approval, she would "not oppose" it.

Meanwhile, in a bid to stem the loss of further Remain supporting MPs, Labour leader Jeremy Corbyn has thrown his support behind a second referendum to avert a ‘No Deal’ outcome.  Labour now plans to table a separate amendment, calling for the UK to remain within the EU’s customs union once it leaves the bloc.  Corbyn’s announcement was met with opposition from his Brexit supporting MPs.

Discussions continue with EU leaders

Whilst developments occur on what seems an hourly basis in Westminster, negotiations between UK and EU officials continue on the terms of the UK’s withdrawal from the EU. 

Whilst the EU has refused to re-open formal negotiations on the Withdrawal text agreed last year, officials have been working on amending the language in a political declaration on future relations.  In particular, “alternative arrangements” or a legal codicil for the Irish backstop and further legal language that would give “additional guarantees” about the temporary nature of the backstop are being explored, according to the Financial Times

As a reminder, the most controversial element of the Withdrawal Treaty is an agreement for the UK to remain aligned to the EU’s Customs Union until a solution is found to avoid a hard-border between Northern Ireland and the Republic of Ireland.  Given the fragility of peace on the island of Ireland, both the UK and the EU have placed an importance on avoiding physical infrastructure on the border.  Pro-Brexit Conservative MPs believe that such an arrangement would “shackle” the UK to the EU indefinitely and argue that the UK would be unable to strike meaningful post-Brexit free trade deals with other countries, including Australia. 

Contingency Planning for No Deal Brexit Continues

As March 29 quickly approaches, the UK Government continues to inform the public and businesses of the potential risks, along with setting measures in place, to deal with a ‘No Deal’ scenario.  On 27 February, HMG published its assessment of the impact of a No Deal on business and trade.  A link to the report, which details possible disruption to cross-Channel trade, can be found here

The Australian Department of Foreign Affairs and Trade has also published advice here, together with advice for businesses from Austrade here and the Department of Industry, Innovation and Science here.

The UK continues to seek contingency agreements with non-EU trading partners, including Australia, Switzerland, the United States and others, should it leave the EU without a deal.

Market Reaction

With the prospect of a delayed Brexit and lowered imminent threat of a Hard Brexit on 29 March, the Pound Sterling hit a 21-month high against the Euro and reached $1.3239 USD, the highest level since the end of January.

The ABCC and Brexit

The ABCC will continue to follow these developments closely in the coming weeks.  We look forward to keeping members up to date with the very latest from London and what it possibly means for the Australian-British business community.  

If you would like to receive more frequent Brexit updates or have any questions, please feel free to contact our office on abcc@britishchamber.com.

By Paul O’Hagan, ABCC General Manager, Victoria, South Australia and Western Australia.  Prior to joining the Chamber, Paul was Senior Advisor to the U.S. Government on Brexit.

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