October 22, 2018
A week of intense political tension in the UK
In the last few days, the chances of a no-deal Brexit have risen significantly for two interlocking reasons. The Tories seem to be hell-bent to destroy Theresa May while refusing to back a withdrawal agreement. The FT reports this morning that there is heightened speculation that a leadership challenge could be triggered very soon, with Sir Graham Brady, chairman of the backbench 1922 committee, receiving the 48 required letters from MPs as early as this week. The next meeting of his committee is Wednesday. What is breathtaking is the brutality of the language eurosceptic MPs are using in off-the-record briefings to journalists - conjuring up images of lethal violence against the prime minister. While a leadership challenge is definitely on the cards as a possibility, we cannot as yet see a challenger getting the required majority votes among MPs. But the situation is extremely fluid.
The second reason why we think a no-deal Brexit is becoming more likely is that Remainers are increasingly betting the house on a second referendum. We note with surprise that a great number of UK commentators take it for granted that the EU would give its unanimous approval to what would effectively amount to a one-year extension of the Art. 50 process. We saw for instance Philip Stephens in the Financial Times on Friday dismissing the obstacles with the remark that it is difficult to see how the EU could withhold consent.
We do not share such a view of the problem. As we see it, the EU will consider a prolongation as a matter of course only until the European elections or, to be precise, until the dissolution of the European Parliament in April next year. Beyond this, the EU might prolong but only if it received clear evidence that the UK was indeed about to change its position. We see no realistic prospect that the UK parliament would have even legislated a referendum before the European Council would take a vote.
In our view, UK would have to revoke Brexit first, and then hold a second referendum at leisure. In any case, re-entry is possible under Article 49.
We agree with Francois Heisbourg highlighting that the EU holds elections in May and has to negotiate a budget. Life goes on, he says. This view was also echoed with Jean-Claude Piris, who noted that the maximum possible time of an extension was only a few weeks.
We think it is a huge miscalculation among Remainers to set themselves up for a situation in which the EU will end up having to reject their request for a second referendum. If this goes on, this will turn into another back-stabbing myth. The political damage could be huge and lasting.
The reality continues to be that if the Remainers vote down Theresa May’s Brexit deal, say in January of February, the most likely outcome would then be a no-deal Brexit. May could trigger elections - the Labour Party would support it. But she would only do so if she had a chance to win them, which must be highly doubtful under such a scenario. Rather, she might calculate that by 2022, the economy will almost certainly have recovered from a one-off Brexit shock in 2019.
Nor is it likely that May will shift gear. Kevin O'Rourke is right to dismiss the hope among hard Brexiteers that May can be pivoted towards a Canada-style deal. A Canada-deal is simply not available.
Yesterday, May held a long telephone conference with her ministers, some of whom expressed concern about the idea of a prolonged transitional period or an open-ended backstop period. May, meanwhile, defended her position in the Sun, where she wrote that she would press ahead with her policies irrespective of the consequences to herself.
Would Labour really support a people’s vote after voting down a deal? Patrick Wintour (@patrickwintour) informs us that while well over half a million people demonstrated for a second referendum in London, Jeremy Corbyn flew to Geneva to discuss Chile, and various other Labour politicians were preparing for a march against fascism.
All this means that it is not really hard to see how an accident can happen. If you really think that it is unlikely that the UK parliament will accept May’s withdrawal agreement, then what you are saying is that you are expecting a no-deal Brexit. The second is a logical consequence of the former - once you take into account the EU’s legal and political position, and the majorities in the UK.
The only reason we are not betting on a no-deal outcome just yet is that the above-mentioned logic will in all likelihood become much clearer at the time of the vote. And the EU will make it clear that this will be a take-it-or-leave-it offer, just as Article 50 said it should be.