UPDATED ON 16 JANUARY

Last night (15 January) the House of Commons rejected Theresa May’s Brexit deal by over 200 votes - the largest defeat in history of a government in the House of Commons.  MPs have killed off the deal negotiated with the EU; now they need to see if they can agree an alternative.  

With just ten weeks to go before Brexit day (29 March 2019), we still have no agreement on what Brexit will be. We are living through a period of greater political volatility than any time in the last forty years. We stand on the threshold of a huge change to the UK economic and society but we still do not know exactly what form that could take, how fast it could happen and how big a change it may be.

The possible outcomes are actually widening not narrowing the nearer we get to Brexit day.

What happens next?

The historic scale of yesterday’s defeat in parliament means we will see some radical responses and rapid political manoeuvrings. Jeremy Corbyn immediately tabled a vote of no confidence in the government yesterday, which he lost; Conservative and DUP MPs all supported Theresa May's government.  This means there is unlikely to be an election for now, although even some Ministers are privately saying that an election may be the only way out of the current Brexit political deadlock. 

Tonight Theresa May announced she is seeking discussions with the leaders of all political parties to find a Brexit solution that can win the support of a majority of MPs.  She will return to Parliament on Monday with a 'Plan B' which will be debated and voted upon.

Meanwhile we are seeing other MPs seeking to influence what happens next.  One group of MPs has now declared in favour of a ‘Peoples Vote’. Another faction of MPs (across party) may push for a ‘Norway Plus’ Brexit (single market and customs union membership). Expect support to emerge too for delaying Brexit by extending article 50.

We may see MPs and even Cabinet Ministers pressing for ‘indicative votes’ in Parliament: a series of votes to find out what (if anything) could be supported by a majority of MPs. Cabinet unity will be tested: with some minsters possibly calling for No Deal or a ‘People’s Vote’. Theresa May’s own ministers may now urge her to adopt a radical change of plan or resign. The next few days will be volatile and we can also expect Parliament (backbench MPs) to increasingly seek to take leadership of the process.  

Nonetheless there may be a few weeks more of Parliamentary debate before anything decisive happens. Backbenchers may take more radical steps in mid February. In the meantime as much pressure will now be on Jeremy Corbyn as Theresa May; having lost his no confidence vote, the Labour leader will increasingly be asked what his alternative is and will be under pressure to support a second referendum.

The options ahead are set out on the right hand side of this flow diagram ("deal rejected"):

As you can see, there are many different potential outcomes (explained further here) The default remains a ‘No Deal’ Brexit: unless MPs can agree on something (and the EU agrees too), then we will leave the EU on 29 March with No Deal. We are currently headed straight for No Deal; a majority of MPs have to change course to divert us from this destination.

What does this mean for business and other organisations?

  1.  Don’t wait for the politicians to reach an agreement. By the time this political deadlock breaks, it will be too late to make contingency plans for 29 March. So…
  2.  If you can, plan for all eventualities. If you haven’t already, do some scenario planning, assessing how the different options impact on your organisation, your markets and suppliers. We can help and there are more things you can do whatever stage you are at in your Brexit planning.
  3.  Identify opportunities that uncertainty and disruption in the market create: where are your competitive advantages; how can your goods or services help others navigate this uncertain time; are there opportunities to increase exports in the rest of the world or acquire undervalued assets?
  4.  If nothing else, plan for No Deal: and work out when you need to implement plans to ensure ongoing business continuity.
  5.  Get match fit: focus on the business basics: cashflow; retaining and attracting talent; sweating your assets; meeting customer needs; and removing unnecessary costs.

We will keep you updated on developments as they happen over the coming days and weeks. We will be sharing practical examples of what other organisations are doing to prepare, including ‘no regrets’ decisions you can take now and contingency plans you should have in place.

Above all else, keep calm, carry on and be ready for change.