12 Mar, 2019FORTUNE.COM
If the endless stream of Brexit news has made your eyes glaze over and brain shut down, you’re far from alone. But Tuesday’s vote in the British Parliament is really very important, as what comes next will make or break Brexit--and arguably the United Kingdom.
The vote, scheduled for 7 p.m. London time, will mark Prime Minister Theresa May’s second and probably final attempt to get Parliament to agree to the exit deal her government negotiated with the European Union. The first attempt resulted in the worst government defeat in modern British history, and there are just 17 days left before the scheduled Brexit date.
Here are the scenarios that might, in theory, play out in the coming days.
Last time May put her deal to the House of Commons, it was rejected by a ratio greater than 2:1. Although she has spent the intervening two months begging the EU for changes that could convince members of Parliament (MPs) to change their minds, she has utterly failed.
You may have read in the last day that she won a “revised deal” in Monday night talks with European Commission President Jean-Claude Juncker, but all she really got was repeated assurances that no-one in the EU wants the crucial Irish backstop mechanism (explained here) to be permanent, leaving the U.K. indefinitely tied into a customs union with the EU if the two sides fail to strike a new trade agreement in the next couple years.
Juncker’s concession would allow the U.K. to appeal to an arbitration panel if it feels the EU is acting in bad faith, and the U.K. therefore wants to pull out of the backstop. The legal situation remains effectively unchanged, as May’s attorney general, Geoffrey Cox, confirmed Tuesday. So hardcore Brexiteers, who want a clean break with the EU, are deeply unlikely to back her in the vote.
As is the opposition Labour Party. The main party rivaling May’s has now set its sights on a fresh referendum. The other British parties are generally against Brexit in any shape or form. So, in short, the deal will probably be rejected on Tuesday--though never say never, particularly due to the complexity of the alternatives.
If the deal prevails, incidentally, then remember this is in many ways only the beginning--the U.K. and EU still need to spend a two-year transition period thrashing out a new agreement covering trade, regulations and so on.
If May’s deal falls in Tuesday’s vote, the plan is to move onto another vote on Wednesday, in which MPs would get to approve or reject the idea of a no-deal Brexit. A no-deal Brexit would be catastrophic for businesses, which would on March 30 immediately face new tariffs, supply chain disruptions and regulatory uncertainty on an epic scale.
Some hardcore Brexiteers might be comfortable with this scenario, but they are very much in the minority, so don’t expect Wednesday’s motion to pass either.
However--and this is a gigantic “however”--a rejection of the concept does not mean a no-deal Brexit is off the table. Unless a deal or an extension is agreed by the end of March 29, the U.K. will by default crash out of the EU without a deal, and chaos will ensue.
Assuming Parliament rejects both May’s deal and no-deal, the prime minister’s Conservative government will most likely ask MPs on Thursday for the mandate to ask the EU--and here we mean the 27 other EU countries, not Juncker and the European Commission--for an extension of the Brexit date, in order to avoid no-deal-by-default.
This is where, believe it or not, things get even more complicated. The problem here is that, in a couple months’ time, a new European Parliament is being elected. The new European Parliament will start work at the beginning of July and, because of Brexit, it shouldn’t contain any British lawmakers.
So what sort of extension would the U.K. ask for? The simplest option would be a short extension of a few months, so the U.K. doesn’t end up remaining part of the EU but without any representation in its parliament. But what would be the point? Two years after Brits voted for Brexit and May set the withdrawal in motion, the U.K. is still squabbling internally about what it actually wants--there’s no evidence that a few more months will make a difference.
That means there’s a big risk the EU would reject a request for such a brief extension, unless the U.K. could clearly explain how it would use the time constructively. Given the low likelihood of that happening, the EU might propose a much longer extension, presumably with the U.K. parties suddenly having to find candidates to field in the imminent European Parliament elections.
What would happen then? A second referendum? A new general election in the U.K.? Revolution? Soothsayers, your time has come.