Brexit deal suffers catastrophic defeat

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British Prime Minister Theresa May has suffered yet another stinging setback as MPs voted overwhelmingly to reject her Brexit deal with Brussels. Many of her fellow Tories — 118 to be exact — helped lead the charge against the embattled prime minister. There were 432 votes against, and only 202 for her plan. This is by far the biggest Tory revolt in modern history.

All this, with just 10 weeks to go until Britain is scheduled to leave the European Union and no deal in place.

As we’ve written in the past, Britain’s ugly divorce from the EU is only getting uglier. After delaying the vote for her deal late last year after fearing almost guaranteed defeat, May has failed to rally support from her party and across the aisle, leaving the pact in tatters. While she cannot be forced out of the job thanks to surviving a leadership challenge last month, her political clout has taken a serious beating and it’s fair to say she yields very little power even over her own party.

Labour Leader Jeremy Corbyn immediately tabled a motion of no confidence to be debated tomorrow. Should May’s minority government not secure the votes they need to stay in power, the UK will be plunged into a general election that most observers say will only cause more harm than good. While this is unlikely, given the Democratic Unionist Party has said they will support May, the continued instability will no doubt wreak havoc on the markets.

So, what exactly happens next? No one can be sure. For starters, May’s political stock has never been lower, and calls for her to step aside are getting louder by the hour. But here are a few scenarios that could take place:

May resigns as prime minister

This is unlikely to happen, since May has signalled she intends to stay on. Nevertheless, her historic and humiliating defeat makes it hard to see how she can continue to lead not only her party, but the country. With just weeks to go until Britain is scheduled to leave the EU, where she will find support for whatever Plan B she comes up with is almost impossible to contemplate.

Plan B

While most don’t even know if the prime minister has a backup plan in place, theoretically she could fly back to Brussels and attempt to secure a more appealing deal that would pass a vote at Westminster. But this could be very difficult, because EU leaders have signalled they have lost patience with the British, and don’t want to go back to the negotiating table.

Hard Brexit

If no deal is reached between Britain and the EU by March 29, the country’s exit will be known as a Hard Brexit, considered the worst-case scenario. This would see the UK cut ties with the EU overnight with no transition period. After that happens, London would have to follow the World Trade Organization’s terms on trade while having to negotiate new trade deals with other countries. If a Hard Brexit happens, it could cause long-lasting damage to the economy and it’s virtually agreed by both sides that it would be disastrous.

Second referendum?

With the government’s Brexit deal dead in the water, and the looming threat of a Hard Brexit hanging over the entire country, could a second referendum be held before March 29? The idea once deemed impossible could happen. There is a bipartisan draft bill that is recommending a second referendum — and notes that in order for this to happen, Article 50, the treaty that allows nations to withdraw from the EU — would need to be extended for another vote to take place.

Many Brexiteers who championed for the Leave campaign say this shouldn't even be considered, and would be an insult to those who voted to leave in the first place. It’s important to remember that the 2016 vote to leave the EU was bitterly divisive, with the Leave side barely squeaking out a victory at just 52 per cent to 48 per cent.

Looking ahead  

While we may not have a clear view of how Brexit will go, we can tell you that Provident will continue to be keeping a close eye on all developments at Westminster and in Brussels. The stakes are high not only for Britain, but for the thousands of Canadian companies who do business there.

As a member of the Canada-UK Chamber of Commerce, we provide our clients with the necessary insights to help them navigate the complexities that is British politics, and what it means for Canadian investment across the pond.