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Brexit delayed

Words by:
Associate Director
April 11, 2019

In the early hours of this morning it was confirmed that the United Kingdom will not leave the European Union on Friday. The remaining EU members states have granted the UK a six month extension to Article 50 to 31 October 2019 with minimal conditions attached. The strong indication is that a further extension will be granted if there is still no deal at that point.

This allows MPs to stagger into the Easter recess to rest and recover from what has been an exhausting few weeks. Meanwhile, cross party talks continue between the government and Labour to try to break the Brexit deadlock, albeit with little hope on either side for a positive outcome. So what happens next and what does this mean for the Brexit process, the future of the government and for businesses and investors?

Firstly, there is still little prospect in the near future of securing a majority in the Commons for any specific form of Brexit and the pressure of the ticking clock has now been removed. No deal now seems extremely unlikely to ever happen. If the EU weren’t willing to contemplate this last night when the UK requested an extension without presenting any clear plan for what it would be used for, they probably never will.

Parliament now has more time to try and find a resolution and, while it is hard to see consensus emerging any time soon, the most likely long-term outcome still appears to be a softer version of Brexit, though it could take quite some time to arrive at this point.

Meanwhile, Theresa May is planning to stay put as Prime Minister until a deal is agreed. There remains a clear appetite among many Conservative MPs for her to go sooner but they lack a formal mechanism to oust her. However, her tenure does appear to be in its final days. If a Brexit deal is not in sight soon then the collective mood of the Party, expressed via the 1922 committee and/or the Cabinet, may eventually force her from office regardless of whether a Brexit deal is secured.

Indeed, the next Conservative leadership contest has essentially already started. Multiple leadership hopefuls have been brazenly setting out their stall at events with think tanks that look very much like hustings (see Matt Hancock and Penny Mordaunt speaking at an Onward event earlier this week) or via set piece interviews in the media.

Brexit will continue to dominate the political agenda for some time to come, with a Queen’s speech is now unlikely to be brought forward until the Autumn. But this extension provides breathing space in which these leadership hopefuls will continue to set out their vision for the future. It will also allow diligent ministers to return some focus to their day jobs and move forward domestic policy initiatives that have been starved of political attention in recent weeks (as long as they don’t require primary legislation).

This remains a hung parliament with no party holding a majority, while half the Cabinet are openly auditioning to be the next Prime Minister. Power and decision making is more diffuse than ever and this presents unique opportunities for businesses and investors seeking to influence policy. But capitalising on these opportunities will require detailed understanding of the political drivers in a fragmented and complex environment.

The Brexit question drags on but there is plenty of work to do for those seeking to influence the UK political environment.

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