This week was definitely not lacking in economic news. Donald Trump’s administration continues to be hard at work negotiating a trade agreement with China which is expected to end the trade war, an event likely to impact positively the entire world. Moreover, the European Central Bank had an important policy meeting this week, where new cheap loans for European banks were announced and the economic forecast was revised down. The ECB also stated that we would almost certainly not see an interest rate increase in 2019, based on how difficult it is for inflation to rise. However, besides these events, we thought it would be a good idea to do another update on one of the key issues at hand – Brexit. With less than 21 days left until the official deadline, what is the United Kingdom up to?
Since the last time we updated you on the developments surrounding the United Kingdom’s exit from the European Union, there have only been a few changes, but they are important. Most notably, there is more internal clarity about what the UK aims to achieve in the talks. Theresa May was initially reluctant to rule out a no-deal Brexit, most likely in an attempt to force MPs to support her deal: she hoped that no matter how much they hate the deal her government negotiated, it would still look better to some than the unknown risk of a hard Brexit. However, since the European Union did not budge on the Irish backstop issue and May saw her deal is not likely to gather enough support, she made a couple of public commitments. First of all, there will be another vote on her proposed deal (as it is right now) on Tuesday, March 12. If the vote fails, on March 13 Parliament could vote on whether to leave the EU with no deal at all. If no-deal Brexit also fails to gather enough votes, then on March 14 MPs will vote once more, this time on whether to postpone Brexit. In other words, if MPs say they prefer neither May’s deal, nor a hard Brexit, on March 14 they will almost certainly vote to postpone Brexit and take more time to discuss their options.
Meanwhile, the opposition party in the UK Parliament, Labour, have also consolidated their ideas. Under Jeremy Corbyn’s leadership Labour MPs initially stated they want a customs union with the EU. Their proposed plan was essentially leaving things as they are, as if the United Kingdom remains an EU member, but without the voting rights in the European Parliament that a full membership grants. After much criticism from voters and a lack of support for this plan, now the Labour party has officially stated that they will campaign for a second Brexit referendum if the UK postpones Brexit.
As of now, May has done all she could have for her proposal. Members of Parliament have a few days of consideration leading up to the possibly triple votes next week, but there are no new statements and opinions on the table. Nevertheless, one last element that investors following the United Kingdom should keep an eye on is that if May’s deal and the no-deal Brexit vote both fail, Theresa May will most likely resign her position as Prime Minister and more chaos will ensue as the UK searches for new leadership to take them the rest of the way to their goals.
