UK Government Clears First Brexit Hurdle… Many More to Come

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After over 14 hours of debate over two days and bitter clashes in Parliament, the U.K. government’s Brexit legislation has cleared its first hurdle as ministers of Parliament voted by a large majority to approve the leaving the European Union (Notification of Withdrawal) Bill by 498 votes to 114.

Source Telegraph Newspaper

The size of the majority does not reflect the relative position of “remainers” to “leavers” but, rather, the position taken by many remainers that the popular vote was to leave and, regardless of their own position, they do not have the right to vote against the decision of the people in a national referendum. The debate was more an opportunity for politicians to have their say than actually change the decision to start formal leave proceedings.

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This means Prime Minister Theresa May’s government is cleared to trigger article 50 next month, the formal start of departure from the E.U. Not that anything will change in the short term, but article 50 is the first step in a process that should take two years but could well take longer. For the next at-least-two years there will be no legal change for those manufacturers trading with the U.K. and the E.U. Article 50 is just serving notice on the U.K.’s intent to leave. Once Article 50 is invoked, the U.K. will have a minimum of two years’ negotiations during which, of course, there will be considerable volatility to exchange rates as arguments and accusations are hurled backward and forward, and firms will start making contingency plans in case the U.K. does not manage to secure a free trade deal with the E.U, at the end of the process.

The two-year period laid down in the article 50 agreement could get stretched with an “interim agreement” or “adjustment period” to three or four or possibly even five years, although that degree of uncertainty would be damaging for both the U.K. and the European Union.

Two years from now this government will be coming to the end of its term in office and will need to prove it has taken control of uncontrolled immigration, the imposition of E.U. law and has an end in sight for budget payments, so an indefinite postponement to finalize the terms of a new deal is unlikely. The next general election in the U.K. is scheduled to be held on May 7, 2020, unless it is called earlier, so the government will want to show it has delivered on its promises in the run up to the election.

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In such a pre-election atmosphere, economic interests are likely to be sacrificed on the altar of political expediency. The timeframe is further constricted by elections this year in France, which means Brexit negotiations will not start in earnest until later this year, after the new French government is in office. A French government that might want to push its own exit… depending on how the election goes, of course.

So, one hurdle overcome in what will feel more like a marathon than a sprint; buckle up and enjoy the ride!

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