A political storm, long brewing, was unleashed across the UK this week when Theresa May announced the details of the draft Brexit withdrawal agreement she has reached with the EU. In its wake, everything is in total flux. Business hoping for certainty and the stability of a deal now look on as the political system implodes.
So what might happen? And what should businesses do, as the clock continues to countdown to Brexit Day on 29 March 2019?
Anything is possible
As I blogged earlier this week, a done deal on Brexit requires approval of the UK parliament. The Prime Minister spent three hours in the House of Commons yesterday taking flak from all sides as most MPs of all parties ripped into her Withdrawal Agreement (see here for details of what the draft agreement means). We wait over the weekend to see if she faces a vote of confidence from her own MPs and a leadership challenge.
We can only speculate about what might happen next.
Will Theresa may be ousted as Prime Minster by her own party?
Don’t write off Theresa May just yet. If she faces a vote of no confidence from her own MPs, she needs only a majority of them to support her (165 would get her over the line); and that would then put a lid on any further leadership challenge for 12 months.
She then has two weeks to build support for her deal. There is not a majority at the moment; but the government will be looking to get some MPs to switch over the coming weeks.
If Theresa May fails to get the backing of 165 of her MPs, then she has to resign and a contest takes place to find a new leader. This would probably extend into early January. This might usher in a leader more willing to accept No Deal or propose something radically different. It might create a split in the Conservative parliamentary party – there is such strong feeling that it may be difficult for any leader to command the support of all Conservative MPs on both sides of the Brexit divide.
Can the Prime Minister seek further concessions from the EU?
Before any vote in Parliament (around 10 December), there will be an EU Council, where EU heads of state are due to sign off the draft agreement. Theresa May could try to secure further concessions there and use that to lever more support in parliament.
If parliament votes against the deal on 10 December it is feasible that the Prime Minister could return to EU heads of state at their council on 14/15 December to seek further changes to the deal.
The EU has indicated they are not willing to offer further concessions, but we will see.
Could there be a change of government or an election?
If the DUP withdraws it support, the government could be defeated in a vote of confidence in the House of Commons. If it is defeated on second vote of confidence within 14 days then the Government has to resign. Jeremy Corbyn might attempt to form a government but it seems very unlikely he would secure any conservative or DUP MPs to support him. At this point, an election could be called. An election in late January is possible; whether it would deliver any change in the composition of parliament may be debatable; a Labour government is possible; another hung parliament and no overall control is equally likely.
Another possibility, in the event of the government losing a vote of confidence, is that a group of cross bench MPs - of centrist positions – might seek to create a government of national unity, perhaps for a time-limited period.
Is a Second referendum a possibility?
Like nearly every aspect of Brexit, at the moment a second referendum does not command a majority support in the House of Commons. But there are signs it may be gaining support with rumors that some cabinet ministers might back it as a fall back. It is possible that MPs choose to put the withdrawal agreement to a people’s vote – as a way out of political deadlock. Bear in mind that this would not necessarily offer the choice of ‘no Brexit’ and the outcome of such a vote is very much unknown. It could even hasten a No Deal Brexit.
Could the EU extend article 50?
The EU can extend article 50 – and push back the date of Brexit to allow more time for the UK to get its act together. This would require unanimity in all 27 EU states (not be any means guaranteed) and would also require the UK parliament to amend existing law that sets 29 March as the day we leave the EU.
What is the default?
If no deal is agreed in Parliament and no extension made to article 50 then we leave the EU on 29 March with no agreement in place; no transition; and instant change in many aspects of the economy (see here for what No Deal means).
With 19 weeks left until Brexit day, the possibilities of what may happen continue to widen. It is possible that the withdrawal agreement will be agreed. But as things stand this Friday night, it seems more likely that we face a prolonged period of political crisis as we edge towards no Deal. At best we may not have certainty until January or even February next year. As markets react, there may be more pressure to pull politicians back from the brink. Or we could have a new Prime Minister (with a radically different Labour or Conservative agenda) by Burns night in January.
What does this all mean for business?
It is essential that business keep calm and carry on planning. Many organisations have been developing No Deal plans. These now need to be stepped up and operationalised. Businesses need to plan for all eventualities, including assessing the impact of a change of government or a prolonged period of political instability. Every business I have worked with feels more confident after scenario planning. They have a clear picture of the main areas of risk for them and by looking at different scenarios, they can identify ‘no regrets’ decisions to mitigate risks that are common to all.
Identifying clear trigger points for mitigating action also means businesses know what they need to do and when they need to do it. Increasingly many of these triggers are related to implementation times. Organisations are pulling the trigger on No Deal plans as they have lead times of several months for adjusting production, stock, changing import and export processes or making regulatory changes.
My colleagues and I are working with many businesses – and local government – to help develop contingency plans for ensuring business continuity and regulatory compliance in the event of No Deal and actions to mitigate against significant costs increases. Many businesses are also taking action now to ensure they are ‘match fit’ for Brexit: looking at how they can be as lean and agile as possible, strengthening financial resilience over the coming year in the face of uncertainty.
Finally, planning for No Deal equips businesses to shape the debate by explaining what a No Deal will mean for them, their employees and their supply chain. There is an opportunity over the next 3 weeks for local businesses to share with their MPs what a No Deal Brexit would mean for them - focusing minds on what is at stake.
If you haven't started planning for Brexit – and for wider political change - or if you need some help developing, reviewing or implementing your plan, it's not too late and we can assist and help you navigate political uncertainty: Brexit Room Planning
With 19 weeks left until Brexit day, the possibilities of what may happen continue to widen. At best we may not have certainty until January or even February next year. As markets react, there may be more pressure to pull politicians back from the brink. Or we could have a new Prime Minister (with a radically different Labour or Conservative agenda) by Burns night in January.