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Brexit Bulletin: And Then There Was One

Brexit Bulletin: And Then There Was One

(Bloomberg) -- Today in Brexit: A by-election in Wales makes Johnson’s life even trickier. There are 90 days until Brexit.

What’s Happening?

Boris Johnson’s majority in Parliament has been cut to just one after the Liberal Democrats won a by-election in Wales.

Jane Dodds of the Liberal Democrats won 13,826 votes, beating Conservative Member of Parliament Chris Davies on 12,401. The Lib Dems, who are enjoying a resurgence in nationwide polls and have a new leader, were helped over the line by the decision of two other anti-Brexit parties not to field candidates and to back Dodds instead. The constituency, Brecon and Radnorshire, voted 52%-48% for Leave in 2016, mirroring the nationwide split.

Brexit Bulletin: And Then There Was One

The result might increase speculation that Johnson can’t govern, and that he will need to call a general election to try to win a majority for his version of Brexit. In reality, he already lacks a majority on Brexit — most members of Parliament oppose a no-deal exit and any new agreement he strikes with the European Union will be scrutinized by euroskeptics for signs of fudge.

But last night’s outcome also shows how perilous an election gamble would be. The Brexit Party remains a threat — the Tories would have won the seat if they had taken all the votes that went to the new group — and the Liberal Democrats’ could steal votes from the Tory center ground.

So as we brace for a September storm, here are some of the options:

  1. Johnson doesn’t get a deal, he pursues no-deal and gets blocked by Parliament. We head to an election. He pledges to deliver Brexit. Labour promises another referendum.
  2. Johnson doesn’t get a deal, and Parliament blocks no-deal. Referendum. Could no-deal be on the ballot paper this time?
  3. Johnson is brought down in a no-confidence vote in September. Election.
  4. Johnson is rebuffed by the EU at an Oct. 18 summit. He calls an election and asks for an extension to allow time for the campaign. Brexit delayed. 
  5. Johnson gets a deal. The Irish border “ backstop” is rewritten so it just covers Northern Ireland rather than the whole of the U.K. Promises are made about using technology in future. Parliament rejects it. We head to an election. 
  6. Johnson gets a deal. He knows Parliament won’t back it so he puts it straight to voters. 
  7. Johnson faces a challenge as party leader. New leader. Same old problems.

Today’s Must-Reads

  • Many small businesses are doing little to prepare for a no-deal exit, Allison Ingersoll and Joe Mayes report.
  • Britain cannot spend its way out of no-deal chaos, says the Economist, adding that the only way to solve most of the problems it throws up is with bilateral action.
  • Sky News has obtained an internal government slide — produced before Johnson became PM — that sets out some of the risks of a risks of a no-deal Brexit. It highlights law and order challenges, disruption of data flows, market volatility and security challenges. 

Brexit in Brief

EU Talks Brexit Again | It may be summer holidays in Brussels, but EU member states’ Brexit delegates will meet on Aug. 5 to discuss Brexit, according to a document seen by Bloomberg. They will get an update on the state of play of negotiations. 

Carney’s Message | Bank of England Governor Mark Carney left investors scratching their heads by refusing to take the growing probability of a no-deal Brexit into account when publishing forecasts. But he did have one clear message: The Bank of England can’t bail out the economy in the event of a no-deal Brexit. There are limits to what the central bank can do, he said. Asked if it would engage in massive stimulus, he said: “It depends.”

Moody’s Warning  | Moody’s Investors Service said Johnson’s new tax and spending pledges could have a fiscal impact of at least 1.5% of GDP. “While some of these measures could boost growth, at least in the short term, it is by no means certain that any combination of these measures would counteract the negative growth impact of Brexit and the slowing global environment.” 

Leak No. 2 | The Guardian has its own leaked no-deal document, this one asserting that the UK is currently less able to cope with a hard Brexit than it was in the spring, with risks of panic-buying and civil disorder.

Legal Risk | Crashing out of the EU would put 10,000 legal jobs at risk and may cost the industry about £3.5 billion ($4.2 billion), the Law Society said. It called for a Brexit deal that allows English and Welsh solicitors to maintain their right to practice in the bloc. Without any accord, U.K. legal services revenue could slump by nearly 10%.

Freeport Plan | Johnson’s government is expanding plans to create free ports in the U.K., which it says will boost the post-Brexit economy. An advisory panel that will look at setting up as many as 10 such ports will be unveiled Friday by Trade Secretary Liz Truss. Some trade experts are skeptical about their value. 

On the Markets | As a tough week for the pound comes to a close, it fell 0.2% to $1.2113 in early trade on Friday.

Brexit Bulletin: And Then There Was One

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To contact the editor responsible for this story: Adam Blenford at ablenford@bloomberg.net

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