BNY Mellon: Ahead Of The Latest Brexit Vote


BNY Mellon: Ahead Of The Latest Brexit Vote

By Simon Derrick, Chief Currency Strategist

  • Vote today in UK Parliament could see defeat of the motion brought by the government
  • February 27 vote in UK Parliament now seen as the key moment
  • Have there been clues to the UK government's strategy?

No Deal Brexit

A “no deal” Brexit remains the default option on March 29 unless Article 50 is extended, Article 50 is revoked or a deal is agreed with the EU.

The vote today

The vote today will be on the motion: “That this House welcomes the prime minister’s statement of 12 February 2019; reiterates its support for the approach to leaving the EU expressed by this House on 29 January 2019 and notes that discussions between the UK and the EU on the Northern Ireland backstop are ongoing.”

A number of amendments have been tabled. Speaker John Bercow is yet to decide which of these will be considered by MPs.

There is talk that the government may face a defeat on the back of concerns that the wording does not make it clear that the possibility of a “no deal” Brexit remains on the table.

The vote on February 27

The PM has promised a parliamentary motion about Brexit that MPs can amend and vote on by February 27.

The alternatives

January 29 saw a full day's debate on the UK government's next steps under Section 13 of the EU (Withdrawal) Act take place in the House of Commons. This was followed by votes on a series of amendments to the motion as well as the final motion. This is the best starting point to consider what support there might be within the UK Parliament on February 27 for the different alternatives.

1: A second referendum

Amendment A: The Labour Party amendment

This required ministers to find time for MPs to vote on alternatives to the Prime Minister’s deal, including on Labour’s policy for the UK to be in a permanent customs union with the EU, as well as the option of a second referendum. The amendment was voted down by 327 to 296.

Amendment G: The Grieve amendment

This would have allowed time for six debates on amendable motions, giving MPs the chance to table amendments proposing a range of outcomes (e.g. a second referendum). The amendment was voted down by 321 to 301.

Summary: All amendments that provided a path to a second referendum were voted down by a majority of 20 or more.

GBP: There was little evidence of GBP reacting negatively to the failure to secure a possible path to a second referendum.

2: No “No Deal” Exit/extending Article 50

Amendment B: The Cooper amendment

This would have guaranteed parliamentary time for a private members’ bill that would have extended Article 50 up until the end of 2019 if the PM failed to secure a deal by February 26. This would have been a legally binding amendment. The amendment was voted down 321 to 298.

Amendment I: The Spelman amendment

This amendment rejected the United Kingdom leaving the European Union without a Withdrawal Agreement and a framework for their future relationship. This was a legally non-binding amendment. The amendment was passed by 318 (including 17 Conservative MPs) to 310 (including 3 Labour MPs).

Summary: Parliament could not find a majority for a legally binding amendment that would have opened up the way to postpone withdrawal from the EU should a “no deal” Brexit become a probability. However, a version of the Cooper amendment (supported by Labour MP Yvette Cooper and Conservative MP Oliver Letwin) will likely be proposed on February 27. There is growing talk that the amendment would likely win the backing of MPs. It should also be noted that the February 27 vote is seen as the point that those attempting to block the possibility of a “no deal” exit must act by.

GBP: The failure of the Cooper amendment on January 29 was the point that a significant slide in GBP emerged. This was consistent with GBP’s price action two weeks earlier when it had rallied sharply following a hint from the PM on the possibility of an extension to Article 50 in her statement after her defeat in the meaningful vote in the House of Commons.

3: A deal with the EU that removes the Irish backstop

Amendment N: The Brady amendment

This amendment required the Northern Ireland backstop to be replaced with alternative arrangements to avoid a hard border. This was a legally non-binding amendment. The amendment was passed by 317 (including 7 Labour MPs) to 301 (including 8 Conservative MPs)

Summary: While it’s clear that Parliament supports a deal without the backstop, the question that remains is what would it take for the EU to agree to such a deal. A report emerged in late January (citing a leaked diplomatic note) that European Commission President Jean-Claude Junker had told UK PM Theresa May in a private phone call that shifting her red lines in favour of a permanent customs union was the price she would need to pay for the EU revising the Irish backstop. For the moment at least the UK and EU remain at an impasse.

GBP: The evidence from January 29 is inconclusive as to the potential impact..

Is there a strategy?

Former attorney general Dominic Grieve warned on February 12 that time was running short for the ratification of a deal under the Constitutional Reform and Governance Act. However, the PM said: "In this instance MPs will already have debated and approved the agreement as part of the meaningful vote." The BBC noted that this meant “she could delay the final Brexit vote until days before the UK is due to leave the EU.”

A report emerged on February 12 of an overheard conversation between the UK’s chief Brexit negotiator Olly Robbins and two colleagues. The report said that “during that conversation Olly Robbins said that, in his view, he expects the choice for MPs to be either backing May’s deal or extending talks with the EU.” He is reported to have also said: “... Got to make them believe that the week beginning end of March... Extension is possible but if they don’t vote for the deal then the extension is a long one...”

When asked whether the comments reflected government policy, Brexit Secretary Stephen Barclay said: “No.”

 

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