An anti Brexit protester stands outside the Houses of Parliament in London, U.K.(Photographer: Chris Ratcliffe/Bloomberg)

Confused About Brexit? Here’s a Guide as the Endgame Begins

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The U.K. and European Union negotiators have reached a Brexit withdrawal deal. But it’s far from over yet.

Here are the five things to know as we head into the most perilous part.

1. What’s the deal?

It will be the most important international agreement in Britain’s postwar history. It will set out the terms of separation that allow the U.K. to depart the European Union on March 29 in an orderly fashion -- and bring with it a 21-month grace period to give everyone time to adjust. It will probably also come with a political declaration that sets out how the two sides want to trade in the future -- but the details of a free-trade agreement could take years to work out.

Confused About Brexit? Here’s a Guide as the Endgame Begins

Prime Minister Theresa May has to get her Cabinet to sign off on it at an emergency meeting called for Wednesday at 2 p.m. But she can’t take their backing for granted.

2. So it’s too soon to celebrate then?

Yes and no. For months, negotiations have been at impasse over what’s become known as the Irish backstop. It’s complicated and you can read why it’s been such a sticking point here. The most difficult section of the agreement is the bit dealing with this issue. Pro-Brexit ministers will be worried whether it traps the U.K. in the customs union indefinitely.

So getting the Cabinet on board is one hurdle. Assuming she jumps it, a special EU summit could come end of the month -- Nov. 25 is a touted date -- to get all leaders to give it their rubber stamp. The problems, as always, are back home.

She would still need to get it past Parliament, where the government doesn’t have a majority and faces opposition on all sides. This historic decision is going to hang on just a handful of votes. The biggest risk comes from about 50 furious pro-Brexit Tory lawmakers who think she’s caved to the EU and betrayed the electorate’s call to regain sovereignty. There is also the danger that the 10 Northern Irish lawmakers propping up her government could shoot the deal down. Some pro-EU Tories aren’t very pleased either. With the numbers this tight, May’s whips are fishing for support in the opposition Labour Party while turning the screws on their own.

Confused About Brexit? Here’s a Guide as the Endgame Begins

3. Would losing be that bad?

Depends who you ask. If Parliament rejects it, Labour will push for a general election. But the chaos that ensues would probably also provide the best chance for lawmakers to push for a second referendum. A group of members of Parliament from across the House of Commons are trying to engineer a re-run but so far there’s nowhere near a majority for it.

Confused About Brexit? Here’s a Guide as the Endgame Begins

There’s a real chance that if the deal is voted down, the country would crash out of the bloc into a legal limbo that would snarl trade and freeze up markets. Free trade between Britain and the EU will give way to basic World Trade Organization tariffs and become subject to border checks. Delays would be so bad that the government has plans to turn a major highway near the Port of Dover into a holding zone for trucks. Bottlenecks could bring shortages of everything from food to drugs and manufacturing components. Financial contracts would also risk being void and there’s a question mark over how derivative trades would be cleared.

4. So when could there be a vote in Parliament?

It’s the question on everyone’s lips -- especially traders. The expectation is sometime in December. This is where the choreography matters. Assuming May gets her deal past Cabinet and signed off at a special EU summit in late November we could be looking at a vote within weeks. For now, no one is expecting to cancel their Christmas holidays. Parliament goes into recess on Dec. 20.

5. How does the City emerge from this?

The deal -- once it’s through Parliament -- brings some relief to London’s financial hub because the grace period buys time. But because of the way the talks were structured, there’s still not much clarity about how banks will operate in the future. What is known is that there’s a big downgrade from the status quo. That’s to be expected as the U.K. had long dropped demands for close integration. U.K. banks will have to use the same or similar regime to the one U.S. and Japanese banks use now -- it’s called “equivalence” and it has lots of pitfalls. The full extent of the changes will emerge in the final trade agreement, which could take years to negotiate.

©2018 Bloomberg L.P.