In what was billed as a crunch day for Brexit, MPs decided that they need to ensure all necessary legislation is in place before they can definitively sign off on the Brexit deal and in order to best avoid an ‘accidental no-deal’.  

But with 12 days to go, all options still remain possible on 31 October:  an orderly Brexit, a no-deal Brexit or a further delay.  The “insurance policy” MPs agreed is not fully watertight (see below).  

Match summary:

Today MPs in Parliament debated the new Brexit deal and a proposal for ‘an insurance policy’ to avoid an ‘accidental no-deal exit’. The Brexit deal was agreed in principle by the UK government and EU heads of state on Thursday (see here). Today MPs were due to vote on a motion indicating whether they approved this or not. 

The insurance proposal was an amendment, tabled by Oliver Letwin MP, that:

  • Parliament would not give final approval to a deal until all the necessary the implementing legislation has been passed
  • Requires the Prime Minister to seek an extension to the Brexit deadline in order to ensure there is enough time to do so.  

The Letwin amendment recognises that a lot still has to be done (legal ratification processes) to avoid a no-deal on 31 October and it also, perhaps, reflects a lack of trust in the Government.  It builds on the Benn Act, which requires the Prime Minister to seek an extension to the Brexit deadline, beyond 31 October, if by 11pm tonight MPs have not approved a deal. 

After four and a half hours of debate, MPs approved the Letwin amendment by 322 votes to 306.  The Prime Minister Boris Johnson responded by saying that he “will not negotiate a delay with the EU and neither does the law compel me to do so". Government MPs then walked out of the House of Commons.

What happens next?

The UK must request an extension: MPs did not approve the Brexit deal – they expressly withheld their approval unless and until full legislation putting it into UK law is implemented.  This therefore triggers the Benn legislation and requires the Prime Minister to write a letter to the EU seeking an extension to the UK’s membership of the EU beyond October 31. 

We wait to see whether the Prime Minster will do so:  If he does not, the matter will almost definitely be determined by the UK courts on Monday. [update: a request for an extension was sent at 11pm on 19 October]

EU leaders must decide on whether to agree to an extension: It seems likely they will but there is no guarantee.  If they don’t agree then we have a no-deal Brexit.  They may not decide until a few days before 31 October. 

The UK must agree whatever terms might be offered:  The UK Government and Parliament would take a view on whether to agree to whatever conditions or timeline the EU sets – or else have a no-deal.

The deal must be turned into a Withdrawal Act:  The Government will now introduce an EU Withdrawal Bill in Parliament. This bill will authorise the Government to ratify the Brexit deal, and will give effect to the deal in UK law. It is this bill which needs to pass before the Letwin motion lifts.  It needs to be passed by the House of Commons and the House of Lords.

The European Parliament needs to ratify the Brexit deal:  They have said they will wait until the deal is approved by the UK Parliament.  The European Parliament meets this week (21-24 October) but does not then meet in plenary again until 13 November. 

The chances of the Uk Parliament approving the deal and the European parliament then ratifying it before 31 October look slim.

Match analysis

With 12 days to go to the Brexit deadline, a lot still needs to happen, and a lot could change.

Today’s debate did indicate that as things stand there may be – just – a tiny majority in favour of the deal provided it is fully implemented into UK law.  

The Letwin amendment may make it more likely that the deal is ultimately approved, albeit with perhaps a few weeks delay.  Pro-Brexit Labour MPs and ‘rebel Conservative MPs’, who want to avoid a no-deal Brexit, can more easily vote for the deal now the Letwin arrangements are in place.  

Equally, the Withdrawal Bill could be amended by MPs in all sorts of ways, possibly including a 2nd referendum (unlikely to carry a majority),  safeguards to avoid no-deal at the end of the transition in December 2020 and possibly parameters for future trade relationship with EU or a commitment to closer alignment between the UK and EU.  These in turn could mean the deal loses the support of harder line Brexiter MPs – or the debate could lead Brexiter Labour MPs to pull back from supporting it.  

It is also possible that some extra concessions are agreed in the legislation, bringing the DUP MPs onside.  

The Withdrawal Bill legislation will be the point at which parliament really has to thrash out what it wants.  Expect lengthy and late-night debates in parliament.

What does this mean for business?

With 12 days to go we still can’t say for sure what will happen on 31 October.  The options remain: leaving with no-deal, leaving with a deal, or an extension and delay.  

Currency markets are likely to be volatile as they follow the ups and downs of the debate. 

Business should maintain their no-deal contingency plans for 31 October, continue getting ready for Brexit, and keep track of developments this week.  

As things stand my best assessment is the most likely outcome is a deal passing (possibly amended) after a short (2 week or one month) extension. But the situation is volatile, and no-deal remains a very real risk and should not be discounted.