Market Outlook: The Latest on Brexit

The UK voted in favour of leaving the European Union (EU) in a June 2016 referendum – nearly three years ago, with the exit date set for 29 March 2019. However, on 13 March, UK Prime Minister Theresa May’s EU withdrawal deal was rejected for a second time by an overwhelming majority of British MPs. Then, on Thursday (21 March), the EU’s 27 other member states agreed to grant the UK’s request for a concession, but have provided less time than May had sought.
 
UK membership of the EU will be extended to 22 May, IF British MPs approve the withdrawal deal negotiated with the EU (the UK Parliament will vote [again] to approve this agreement over the coming days). The longer timeframe is to allow MPs time to pass the necessary accompanying legislation. However, if, as is widely expected, MPs reject the agreement (for a third time), the UK’s stay in the EU will only be extended to 12 April. At this point, the UK will have to provide a plan for a fresh approach to the Brexit talks, or "indicate a way forward".
 
What happens next?
 
No-one knows for certain. It is likely MPs will again vote down May's EU withdrawal agreement, resulting in the UK leaving the EU without a deal (most EU leaders would rather avoid a costly no-deal Brexit). Nonetheless, 12 April is an immovable deadline because Parliament must pass relevant legislation to allow the UK to hold elections to the European Parliament by 11 April. Without membership of the European Parliament, the UK cannot remain an EU member. Just as there is no majority for putting the Brexit question back to the people in the House of Commons, there is also not a majority for holding European parliamentary elections, which would keep the possibility of a second Brexit referendum alive.
 
This means chances of a “hard” Brexit are becoming more likely and, excluding any remarkable developments, it confirms the UK will not be leaving the EU on 29 March, as originally planned.

Written exclusively for Moore Stephens by Anchor Capital