Last night a series of votes took place in the UK House of Commons. The purpose of the votes was to establish a potential way forward for the Brexit negotiations that could command the support of a majority of members of Parliament (MPs). This is what we learned:
There is a majority of MPs against ‘no deal’. The amendment that MPs ‘would reject leaving the EU without a deal’ –put forward by Conservative MP Caroline Spelman–was marginally voted in favour by 318 to 310. While this is not legally binding and therefore does not directly rule out ‘no deal’, it is a clear sign of intent in the Commons and a demonstration that were the Prime Minister (PM) to move towards ‘no deal’, the process could be stopped by a revocation of Article 50 or a vote of no confidence in the government if necessary. It is worth noting that while this doesn’t seem a wide margin for support for ‘no deal’, many more MPs do not want a ‘no deal’ scenario but feel taking the threat off the table at this point weakens the PM’s negotiating positions. Our best guess is that only around 100 Conservative backbenchers are truly in favour of ‘no deal’, which is a small fraction of the 650-seat house.
The amendment put forward by Labour MP Yvette Cooper was a stronger and potentially legally binding way of preventing ‘no deal’. It committed to a request to extend Article 50 at a specific date. This amendment was defeated. Presumably a majority of MPs felt that setting a time limit on the PM’s capacity to reach a deal would worsen her negotiating position.
There is a majority of MPs who would support the PM’s deal if she can renegotiate the backstop. Recall that the PM’s deal comes in two parts. The first is a legally binding withdrawal agreement (WA) covering a financial settlement and a backstop arrangement for a future economic partnership grounded in a customs arrangement for the UK and closer alignment for Northern Ireland. The second part of the deal is a non-legally binding ambition for a comprehensive free-trade agreement (FTA), which would overrule any need to use the backstop. Some MPs are concerned that once the WA is ratified, there is little incentive for EU negotiators to move towards the FTA rather than simply default to the backstop. The Democratic Unionist Party (DUP)–which support the PM’s minority government–is not happy with the separate treatment for Northern Ireland to mainland UK.
The wording of this amendment–put forward by Conservative MP Graham Brady–is vague. It states that the House ‘would require the backstop to be replaced with “alternative arrangements” and would support the Withdrawal Agreement ”subject to this change”’. It was approved by 317 votes to 301.
There were reports yesterday that a Conservative Party group of prominent leavers and remainers were reaching common ground (called the Malthouse plan, after housing minister Kit Malthouse). The exact details of this plan seem unclear at present. However, we believe there are four potential “alternative arrangements”:
- a time limit on the backstop
- a commitment to evaluate the use of technological solutions to create an invisible border on the island of Ireland (the sticking point is that this technology does not currently exist)
- replacing the backstop with a ‘managed no-deal’ or alternative end-game such as a Canada FTA
- a more radical way forward would be to extend the negotiation process (and therefore Article 50) to make progress on the final deal which would therefore render the backstop irrelevant. This would seem the most likely way of making sure negotiators on both sides remained focused on moving swiftly towards a final trade agreement and therefore could be most beneficial for business confidence on both sides. The downside for the EU is the UK would not commit to the financial settlement at this stage–but the upside is that, during the negotiations, the UK would continue to make financial contributions.
To be acceptable to UK MPs, any alteration would have to be legally binding. There is therefore a question of whether the EU is willing to reword the Withdrawal Agreement; if not, whether an exchange of letters could have legal weight.
Will the EU agree?
European Council president Donald Tusk quickly issued a statement that the Withdrawal Agreement is not open for re-negotiation. But as with all things Brexit, it is worth remembering we are not in a first-choice world. Compromising in order to help the PM push a deal over the line may–in the coming days–appear preferable to the ongoing brinkmanship which is affecting business sentiment on both sides of the Channel. The PM has currently set 13 February as the date at which she would like to next put a deal to vote at the House of Commons.
Our view remains the same: that the realities of the economic ties between the EU and UK, and the need to prevent a border on the island of Ireland, will ultimately end with a deal that constitutes a relatively soft Brexit and that ‘no deal’ remains a low probability. Sterling has already moved higher in line with our expectations so there may be limited further upside in coming weeks, and there will remain considerable volatility around this trend, as the brinkmanship of the negotiation continues. But the key point confirmed last night is that there is no majority in parliament for a ‘no deal’ Brexit.
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