In our 2019 Annual and Second-Quarter Forecasts, Stratfor said that a delayed Brexit was possible, considering the United Kingdom's difficulties with approving an exit agreement. Developments on March 21 confirmed those forecasts. But the United Kingdom has only bought more time, and a hard exit is still possible considering the country's internal divisions.
What Happened
The European Union agreed on March 21 to delay Brexit until May 22 under the condition that the British Parliament approves the withdrawal agreement next week. If Parliament rejects the agreement, then the Brexit date will be April 12, but the United Kingdom will have the chance to present new Brexit proposals and the European Union will consider another extension. On March 22, junior Brexit minister Kwasi Kwarteng said the government will hold a new vote on the withdrawal agreement next week. He also suggested that, should members of Parliament reject the deal, the government would hold a series of "indicative votes" on different Brexit options.
What It Means
Brexit will not happen on March 29, as originally scheduled, and the British government will have a few more days to persuade the House of Commons to approve the withdrawal agreement, which it rejected by a large margin in January and again in early March. Last week, Commons Speaker John Bercrow blocked what would have been a third vote on the exit deal, arguing that members cannot vote again on an agreement they already have rejected. But on March 21, the European Council endorsed a document with additional reassurances about the temporary nature of the so-called Irish backstop that Prime Minister Theresa May and European Council President Jean-Claude Juncker signed last week. A spokesperson for the British government said that London hopes this development will be enough to persuade Bercrow to authorize a vote.
If the House of Commons approves the withdrawal agreement, then the United Kingdom will have until May 22 to approve enabling legislation and make technical preparations for an orderly Brexit. But if the Commons rejects the deal, May will have until April 12 to decide what to do next. She could ask the European Union for more time, but granting this request would come with strings attached. First, the European Union will demand that the United Kingdom participate in the elections for the European Parliament in late May. Second, the European Union will demand that the United Kingdom present a concrete plan on Brexit's next steps. The British government may have no choice but to ask Parliament what it wants, in a series of "indicative votes" where several options (from revoking Article 50 and aborting Brexit to holding a second referendum to pushing for a softer Brexit and, for example, remaining in the EU customs union) could be on the table. A no-deal exit could happen on April 12 if the Commons fails to approve an exit agreement and the government fails to present a follow-up strategy to the European Union.
Of course, political developments in the United Kingdom could change the situation dramatically if, for example, May decides to resign. In this scenario, the governing Conservative Party would appoint a new leader, who would then become prime minister. This process could take several weeks. A situation like this could force the caretaker British government to ask the European Union for more time.
Internal EU Disputes
While the political crisis in the United Kingdom deepens, the European Union is dealing with its own disagreements. During the March 21 EU summit, member states advocated widely different positions regarding how to deal with the United Kingdom. France pushed a hard line, proposing only short extensions and saying that the bloc should not hold another summit next week if the United Kingdom fails to ratify the withdrawal agreement. Euroskeptic forces are strong in France, and its leaders do not want to be too lenient with a country that is leaving the European Union. On the contrary, countries including Ireland and Germany were prone to show leniency to the United Kingdom, a position connected to the fact they have strong trade ties with the United Kingdom and want to avoid a disorderly Brexit. A compromise was eventually found, with the European Union offering the United Kingdom a short extension but opening the door to additional extensions if London proposes a credible plan for moving ahead. Considering that the United Kingdom may still fail to approve a withdrawal agreement, these divisions will probably reemerge the next time the European Union has to decide how to handle Brexit.
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