Brexit Bulletin: Yet More Turmoil

(Bloomberg) -- Today in Brexit: Parliament is set to confront the threat of a no-deal Brexit after Theresa May’s revamped plan was left in tatters by another crushing defeat.

Theresa May’s new Brexit deal lasted less than 24 hours before it was roundly rejected by Parliament, throwing the U.K. into yet another crisis and blowing the whole divorce process wide open.

The prime minister’s freshly minted agreement was defeated by 391 votes to 242 in another bruising loss last night. While the margin was less than the record 230-vote rout she suffered in January, it still left May’s job, which she has clung to through one crisis after another, in greater peril than ever.

Brexit Bulletin: Yet More Turmoil

The future of Brexit is equally uncertain, a point illustrated by the myriad potential outcomes laid out by the Eurasia Group on Tuesday. The group said that a softer exit — with closer ties to the European Union — was now its base-case scenario, giving it a 40 percent probability. But it also saw between a 10 percent and 20 percent chance of either May’s agreement eventually passing, a no-deal outcome, fresh general elections or even a second vote on Brexit itself. Tellingly, the prime minister, who had warned that voting down her plan could imperil Brexit in any form, included a second referendum among the choices Parliament may face in coming months when she spoke to the House of Commons after her defeat.

With less than three weeks until the U.K. is due to leave, members of Parliament are expected to vote today on whether to take a no-deal divorce off the table — even though that in itself doesn’t guarantee a chaotic departure can be avoided. May is expected to argue against leaving without an agreement. But in an effort to avoid a total split in her party, the prime minister said she’ll offer a free vote, meaning the government will not whip Conservative lawmakers to take a particular side. If politicians vote for a no-deal, May says this will become the government’s official policy, even though numerous ministers have said they will resign in protest.

Assuming the no-deal exit fails, MPs will probably then vote on Thursday to postpone Brexit — an outcome that could provoke furious Brexiteers to quit May’s administration. Still, as Bloomberg’s Tim Ross, Robert Hutton and Kitty Donaldson report, May’s loss on Tuesday left even Attorney General Geoffrey Cox, whose damning assessment of the new terms of the so-called Irish backstop played a large part in killing off the latest proposal, saying that an extension to the U.K.’s departure date beyond March 29 was "inevitable.”

A delay would require the unanimous consent of all 27 EU leaders. Even if that is granted, there’s a risk it will only postpone the drama for another few months while extending the uncertainty that’s taking its toll on the economy. That meant, while many of Wednesday’s newspapers focused on May’s failure, some were particularly damning about the actions of Parliament itself.

After the vote, an exhausted May, voice rendered almost inaudible by a sore throat, summed up the uncertainty ahead, stressing that merely delaying an inevitable decision cannot be an end in itself. “Voting against leaving without a deal and for an extension does not solve the problems we face,” the prime minister said.

Today’s Must-Reads

Brexit in Brief

EU’s View | A spokesman for EU President Donald Tusk said Tuesday’s result increases the risk of the U.K. crashing out of the bloc without a deal. He said the body will consider any request from the government to delay Brexit day but there needs to be a “credible justification for a possible extension and its duration.”

Business Boils Over | U.K. business groups, which have been growing increasingly exasperated with the Brexit process, delved deeper into their thesauruses yesterday. Carolyn Fairbairn, director-general of the Confederation of British Industry, declared “enough is enough — this must be the last day of failed politics,” while Adam Marshall, her counterpart at the British Chambers of Commerce, said that crashing out of the EU “would take political negligence to new extremes.” 

On the Markets | The pound had another whirlwind day on Tuesday, first tumbling after Cox delivered his ruling, and then swinging wildly against the dollar after the vote result was announced. Meanwhile, some hedge funds are warning that investors are too complacent about the risk of a no-deal departure.

Hammond’s Sideshow | Amid the Brexit drama, Chancellor of the Exchequer Philip Hammond is also due to deliver his spring statement to Parliament on Wednesday. He’s likely to emphasize the risks of a no-deal split by confirming that as much as 5 billion pounds ($6.6 billion) more in state funds could be released for spending if a divorce accord is struck.

French Pay Rise | Brexit chaos is benefiting at least one group of workers: French customs officers. The nation’s finance ministry said Tuesday that it is putting 14 million euros ($15.8 million) on the table to boost salaries after a week of industrial action gave a taste of what’s to come in a post-Brexit world.

Mind Your Language | As tensions rose yesterday, lawmakers’ language turned unparliamentary. When Channel Four’s Jon Snow cited sources as saying Geoffrey Cox had been ordered to find a way to approve the changes to the divorce agreement with the EU, the AG, who is usually known for his mellifluous use of Shakespeare, replied using a British epithet that colloquially means “nonsense.” Meanwhile, in Parliament itself, Conservative MP Steve Double called May’s deal “the best turd on offer."

Brexit Bulletin: Yet More Turmoil

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