DUBLIN – The odds of a hard Brexit continue to rise. With just over 70 days to go before the UK leaves the EU, Theresa May’s proposed Brexit deal has failed in Parliament. It’s unclear what next steps are available. Labour leader Jeremy Corbyn has called for a vote of no confidence, but it’s unlikely to succeed. At this point in the game, all options are still on the table, from a second referendum to a new government to a disorderly and economically damaging exit from the EU with no deal. Despite the fact that the no-deal scenario has virtually no constituency in the UK, outside of the very hardest Brexiteers, it seems increasingly likely that Westminster dysfunction and inertia could drive the country to that outcome. The economic impact would be devastating, particularly coming against the backdrop of slowing growth in China and Germany and renewed market volatility. Just another reminder that political disasters are not confined to Africa. – Felicity Duncan
U.K. Parliament Roundly Rejects May’s Brexit Plan
By Max Colchester and Jason Douglas
(The Wall Street Journal) LONDON—The British Parliament overwhelmingly rejected a proposed Brexit deal Tuesday, prompting the head of the opposition to call for a no-confidence vote on U.K. Prime Minister Theresa May and further stoking uncertainty around the U.K.’s exit from the European Union in just over two months.
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British lawmakers needed to approve the Brexit deal Mrs. May spent years crafting with her EU counterparts for it to go into effect. After months of complaints that the deal was unacceptable, members of the House of Commons voted it down by a vote of 432 to 202.
The scale of the defeat—by a margin of 230 votes, including 118 members of Mrs. May’s Conservative Party—shows the depth of dissatisfaction over the agreement. The result means all Brexit options are on the table, ranging from leaving the EU with no deal to not leaving at all after a second Brexit referendum.
Mrs. May said she would continue to pursue an orderly Brexit, even as Jeremy Corbyn, leader of the opposition Labour Party, put forward a motion of no confidence in her government. The prime minister is likely to win that vote, expected late on Wednesday, offering her a fresh chance to negotiate a new deal.
“Every day that passes without this issue being resolved means more uncertainty, more bitterness and more rancor,” Mrs. May said after the vote. “The government has heard what the House has said tonight, but I ask members on all sides of the House to listen to the British people, who want this issue settled, and to work with the government to do just that.”
Tough choice ahead for Theresa May: break your party or break your country… #Brexit
— Simon Fraser (@SimonFraser00) January 16, 2019
The most likely course is that the prime minister decides to double down on her deal, after obtaining further changes from the EU, and put it before Parliament again. That would risk a further parliamentary rejection—and the prospect of exiting the bloc without a deal, subjecting businesses and travelers to significant disruption.
Soon after the results were announced, EU leaders signaled they weren’t prepared to restart negotiations with London, saying the Brexit agreement leaders approved in November was the best deal possible for securing an orderly exit from the bloc.
The risk of a no-deal Brexit had increased with Tuesday’s vote, European Commission President Jean-Claude Juncker said, adding the EU would continue preparing for that possibility. He urged Mrs. May to set out the government’s next steps as soon as possible.
“We regret the outcome of the vote and urge the U.K. government to clarify its intentions with respect to its next steps as soon as possible,” said a spokesman for European Council President Donald Tusk on behalf of the 27 other EU leaders.
Mrs. May could call a second referendum or even a general election, both steps that would require postponing Brexit.
With the U.K. set to quit the EU on March 29, time is running short. Mrs. May must set out the government’s next move by Monday. If, as is most likely, she opts to put a revised version of the deal to a revote, Parliament could be called to approve new wording within weeks.
Two-and-a-half years after the U.K. voted to leave the EU, British politics continues to tear itself apart over whether and how Britain should break away from its largest trading partner. The fractured political landscape caused by Brexit has made finding an agreement around which British lawmakers can coalesce impossible.
Despite the rejection of the Brexit deal, the unprecedented political situation in the U.K. leaves Mrs. May bizarrely invulnerable. Though the opposition Labour Party’s has called for a vote to try to topple her minority government and provoke a general election, it doesn’t have the parliamentary support to oust her party. And an effort by Conservative rebel lawmakers to get rid of Mrs. May as leader fell flat before Christmas.
Amid this political paralysis, there seems to be a majority in Parliament for only one thing: that the U.K. shouldn’t leave the EU come March without securing a deal to smooth its exit. Lawmakers Tuesday gave little clue as to how they would like to see the exit deal changed. Various amendments were proposed outlining potential changes to the withdrawal agreement. Three of the four proposed amendments were pulled and the fourth overwhelmingly rejected, offering little clarity on where parliament wants the Brexit deal to head.
The compromise deal on offer ensured that when the U.K. quits the EU in March it can move into a yearslong transition period to buy time while it negotiates a trade agreement with its European counterparts. But British lawmakers balked at some of the provisions of the deal, in particular a clause that could see the U.K. indefinitely locked in a customs agreement with the EU to avoid a hard border appearing in the Island of Ireland.
Mrs. May spent the last month desperately trying to dredge up support for the deal, reaching out to opposition Labour lawmakers and trade union leaders. She also eked out a series of concessions from the EU to try to reassure lawmakers that the U.K.’s departure agreement would quickly translate into a deep trade deal between the two parties. The outcome of Tuesday’s vote suggests that it was too little, too late.
Given the diplomatic legwork that went into forging the initial withdrawal deal, however, government officials are reluctant to reopen the fraught talks with the EU. One avenue that could be explored is adding more details to a non-legally binding document that sets out the U.K.’s future relationship with the EU. Lawmakers want legally watertight promises that the U.K. would quickly be able to exit a transition period, stop paying money to the EU and have greater freedom to set its own rules.
The pound rose around 1% against the dollar in the moments following the vote, after having slid earlier Tuesday afternoon. For the day, the British currency was up 0.2% against the dollar at $1.28. The euro was lower by around 0.5%, buying $1.14.
Currency strategists said a substantial loss for Mrs. May’s proposal was at least partially baked into the price of sterling. A surprise result—especially fewer no votes than expected or an outright win for Mrs. May—could have sent the pound soaring against the dollar.
