September 6, 2019 / 11:30 AM / 14 days ago

In the Brexit maelstrom, UK wavers between no deal and no exit

LONDON (Reuters) - Once the chaos of the Brexit crisis is stripped away, there are ultimately just three main choices for the United Kingdom: departing the European Union without a deal, striking an exit deal or cancelling the entire endeavour.

FILE PHOTO: Anti-brexit badges are pictured in London, Britain, September 4, 2019. REUTERS/Hannah McKay

There are, however, many routes to those outcomes, including through an election.

1) NO-DEAL BREXIT

British Prime Minister Boris Johnson wins an election in October and demands at an EU summit on Oct. 17-18 that the bloc drops its insistence on the Irish border backstop but the EU refuses. The UK leaves on Oct. 31 - a Thursday.

Johnson and opposition parties want an election but they have so far failed to agree a date. Johnson, who has suggested Oct. 15 as a date, is betting he can win back the Brexit voters poached by Nigel Farage’s Brexit Party.

If he won an election before Oct. 31, Johnson could get round the law that opposition parties are passing to force a delay to Brexit. That is why many opposition parties do not want an election until after that delay has been agreed.

Johnson, though, has repeatedly refused to delay. It is unclear what his response would be if opposition parties refused an election before Oct. 31 and yet demanded he abide by the law that would force him to delay Brexit.

A no-deal Brexit is the nightmare scenario for many big businesses: by stripping the world’s fifth-largest economy of many foreign trade relationships at one stroke, it would, they say, dislocate supply chains across Europe and beyond.

An acrimonious ‘no-deal’ departure would hurt global growth, undermine the economies of Germany, France and could further destabilise the United Kingdom - once seen as one of the West’s most stable democracies.

Many supporters of Brexit, though, say those fears are overblown and that, while there may be short-term disruption, Brexit will free the United Kingdom from the EU which is growing far more slowly than the United States and China.

“No deal risk persists, but now wrapped in a general election,” U.S. investment bank Citi said. “This remains a plausible outcome via a general election if a purified anti-EU Conservative Party wins a majority.”

2) NO BREXIT

Johnson is defeated in an election, possibly after being forced to delay Brexit and Labour leader Jeremy Corbyn becomes prime minister. At some point another Brexit referendum is called which “Remain” wins.

Corbyn, a eurosceptic who led Labour to a much stronger than expected showing in a 2017 general election, has said that in an election Labour would campaign to hold a referendum on any Brexit deal - though it is not entirely clear what the choices in that referendum would be.

If Remain won a referendum, the formal withdrawal notice is revoked and Brexit is over, though the dispute would not be and supporters of a departure would seek another decisive referendum.

“If a general election produced a cohesive majority among the remain supporting parties, this could see ‘never-Brexit’ become the base case,” Citi said.

There is, though, no certainty that “Remain” would win a second referendum. Polling shows that voters’ preferences are remarkably inelastic with little change to their views on Brexit.

Opponents of Brexit have shown an inability to unite ever since their 2016 campaign to stay in the EU was riven by division.

3) DEAL

Johnson wins a majority which convinces the EU he can get a deal done, either at the last minute or with a modest delay, or Labour leader Jeremy Corbyn wins a majority and renegotiates the exit after a delay.

Any deal would likely be based on the divorce settlement that Johnson’s predecessor Theresa May agreed with the EU in November 2018 but failed to get through parliament.

“We will get a deal on October the 17th, 18th and then we will come out of the EU,” Johnson said on Friday.

The sticking point with a Johnson deal is the Irish border backstop - an insurance policy designed to prevent the return of border controls ended by the 1998 Good Friday peace agreement.

Ireland is crucial to any Brexit solution.

Though Ireland is only about an eighth of the size of the United Kingdom’s $2.8 trillion economy, Dublin is backed by the rest of the European Union whose economy - minus the United Kingdom - is worth $15.9 trillion.

While Ireland would be very badly affected by a no-deal Brexit, the relative importance of Ireland in the negotiations up-ends almost a thousand years of history in which Dublin has traditionally had a much weaker hand than London.

Reporting by Guy Faulconbridge; Editing by Jon Boyle

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