The Brexit fog: politics catch up

Theresa May vows to resign in a bid to break the deadlock in Parliament on the UK’s withdrawal agreement with the European Union. Over the next two days, we take a closer look at the politics and the implications for the property sector.

Prime minister Theresa May promised Tory MPs last night that she will quit if they back her Brexit deal. “I am prepared to leave this job earlier than I intended in order to do what is right for our country and our party,” she reportedly told backbench Tories

The PM added that she knew that Tory MPs did not want her to lead the next phase of Brexit negotiations “and I won’t stand in the way of that”.

Warwick Smith, managing partner at Instinctif Partners, explains how we go to this point and where we might be going from here:

“The British government asked for an extension, it was granted, but it was asked to 30 June, which was never going to be possible. Quite cleverly, the European Commission came back with a two-phase solution: first, it offered the date of the 22 May if the UK government could get a vote on the withdrawal agreement through parliament, or if it could not, a hard cap for new proposal and new ask for revised extension was needed by 12 April, ahead of European parliament elections.

“I strongly suspect with the right managing, that the European Commission would be open to a further extension – there is some commentary about extending through to April next year. Also noteworthy is that while the UK continues to say that wants a positive vote in parliament on the withdrawal agreement, and a political declaration for the future relationship with the EU, the EC only requires agreement on the withdrawal agreement, it has left the future relationship open which gives quite a bit of wriggle room for the UK government.

“I am more generous than most towards the prime minister, I think there was a plan, I think it is the same plan, which is to run down the clock until every other possibility is more obnoxious than to MPs than the one that she is bringing forward. Looking at parliamentary arithmetic, it is important not to regard the European Research Group as a single body, it includes around 80 MPs which are Brexiteers, but that breaks down we are already seeing some say that May’s deal might be the one they go for rather than risk no Brexit at all. But there are something like 20 die-hards amongst that group of MPs who will never really come over to Theresa May’s way of thinking.

“Which means, of course, that if she is to get her deal through, she will have to rely, at least in part, on opposition votes, so you have to ask the question: why her strategy all along has been to appeal to the DUP and the hard Brexit wing of her own party when really the votes she needs to bring across are on the opposite side of the Chamber?

“But there is a catch 22. Mr Jacob Rees Mogg in his apology in the Daily Mail said he will come across when the DUP comes across, but the DUP will not come across until they are sure that enough votes come across, so they are not left on the losing side. My instinct is a deal can be done with the DUP – it will revolve around money. So, does Parliament have a plan? The answer is it either has too many plans or an imprecise one. We have seen for the first time the Parliament didn’t bottle when it tried to take back control from the government of what goes on in the Chamber.”

There are some risks but no single way way forward in respect of the withdrawal agreement. It is entirely possible that no single way forward dominates. Finally, it is now pretty clear that May is coming to an end of her term. It is expected that she will go sometime in the next few months. The Conservative Party will not want another coronation. They will want a leadership election by early summer, so a new leader is in place for the Conservative Party’s autumn conference.

The party at large favours Boris Johnson considerably ahead of the pack, according to data from Conservative Home, which is followed by Dominic Raab, Micheal Gove and Sajid Javid, Jacob-Rees Mogg and Jeremey Hunt.

Instinctif’s Warwick Smith adds:

“We are currently in the easy bit of leaving the European Union. The withdrawal agreement only needs a simple majority in the European Parliament – this is relatively easy stuff. We then have to negotiate what the continuing relationship looks like, if that has a trade agreement in it, it will have to go to national parliaments and likely regional parliaments.”

Tomorrow we consider the implications for the UK property markets.

james.wallace@realassetmedia.com