UK lawmakers are split over Brexit: What happens next?

FAN Editor

A series of votes in the U.K. Parliament on Wednesday evening showed that political deadlock over Brexit is as strong as ever. Here’s the lowdown on what just happened and what could happen next.

Members of Parliament (MPs) voted on a range of options put forward by lawmakers on Brexit and what relationship the U.K. should have with the EU once it leaves the bloc. The results showed that there is no majority support for any of the eight alternative proposals that were voted on, however.

Options voted on included leaving the bloc on April 12 without a deal, staying in a customs union with the EU, remaining in a customs union and close alignment with the single market as well as holding a second referendum to confirm the Brexit deal or to stay in the EU instead.

None of the so-called “indicative votes” received overwhelming backing but the votes clearly showed a strong opposition to leaving the EU without a deal – seen as a “hard” Brexit option – and a preference among many MPs for a closer relationship with the EU post-Brexit.

For instance, 264 MPs voted for a customs union with the EU (to 272 against); 237 MPs voted for the opposition Labour Party’s proposal for a customs union plus close alignment with the single market (to 307 against) and 268 MPs voted for a “confirmatory” referendum to approve a Brexit deal or to stay in the EU (with 295 against such a plan).

MPs did not vote on Prime Minister Theresa May’s Brexit deal which has already been rejected twice by Parliament.

May told members of her Conservative Party Wednesday that she would step down if her ‘Withdrawal Agreement’ – as the Brexit deal is known – was approved in a third vote that she might try to hold imminently.

The lack of clarity following the votes have left many people scratching their heads over what the U.K. actually wants from Brexit but the vote shows that, like the public, MPs remain as divided as ever.

The votes Wednesday evening showed a clear dislike for the ‘no-deal’ Brexit option, however, with 400 votes against that option.

“While none of the eight Brexit options won a majority in the U.K. parliament tonight, the ‘indicative votes’ nonetheless yielded a few clear insights,” Kallum Pickering, senior economist at Berenberg Bank, said in a note Wednesday night after the votes.

“(1) parliament is strongly against a no-deal hard Brexit; (2) so far, there is more support for a softer version of Brexit than Prime Minister Theresa May’s semi-soft deal; and (3) the option of a new referendum is not off the table,” he said in a note.

Pickering noted that a majority of MPs are staunchly against a hard Brexit and that while this remains the default option come 12 April if the U.K. has not passed May’s Brexit deal or agreed with the EU a further delay, “the clear result (against a hard Brexit) strengthens our view that, if need be, the U.K. would rather ask for a new Brexit delay than plunge into a hard Brexit.”

With no clear consensus on Wednesday night’s votes, there is expected to be a second round of voting on indicative votes on Monday.

As Berenberg’s Pickering noted, “the calculus may change for a significant number of MPs so that a majority in favor of one of the options that almost made it tonight could emerge. 320 votes guarantees a majority in the House of Commons.”

In the meantime, Prime Minister May could try to hold a third ‘meaningful vote’ seeking support for her Brexit deal despite it being defeated twice already in January and March. This vote, known as “MV3” (for the third “Meaningful Vote”) could be held as soon as Friday.

However, many MPs (mainly Brexiteers and the Northern Irish Democratic Unionist Party, which supports May’s government) still dislike May’s deal, particularly the part related to the Irish “backstop.” This aimed at preventing a hard border between the Republic of Ireland and Northern Ireland but involved maintaining a much closer (and potentially much longer) relationship with the EU.

Britain has until May 22 to leave the bloc if politicians agree to May’s deal, or April 12 if it does not. If it wants to stay longer it will have to participate in European parliamentary elections on May 26.

Faced with the prospect of a delayed departure, some Brexiteers agreed Wednesday to back May’s deal if a third vote was held. But it’s nowhere near certain that she would get the support the deal needs to get through Parliament, particularly after the DUP said again that it would not support it.

If the deal was passed, May agreed Wednesday that she would leave office. This would mean a leadership contest in the Conservative Party, and the increased likelihood of a general election.

With Brexit unresolved in the meantime, a longer delay to the U.K.’s departure is now what most economists like Paul Donovan, chief economist at UBS Global Wealth Management, expect.

He said in a note Thursday that in what called “the interminably tedious UK-EU divorce” a “long-delay to the exit seems increasingly likely.”

A longer delay to Brexit and a leadership battle means more uncertainty for British businesses who have repeatedly criticized the government for having no clear strategy when it comes to Brexit.

“Brexit is a big deal (for businesses), it’s the source of a lot of uncertainty and businesses do not like uncertainty,” Mats Persson, U.K. Brexit Strategy Leader at EY, told CNBC Thursday. “No one likes this almost permanent state of limbo we’re in.”

“Underpinning all of that is you have the wider political uncertainty,” Persson, who was also a former adviser to previous Prime Minister David Cameron on EU Affairs, told CNBC’s Willem Marx.

“The prime minister talking yesterday about her potential departure date throws up the prospect of a potential general election … So you also have not only the Brexit outcomes you have to think about (as a business) but also the political uncertainty and the potential for changing government,” he said.

“It’s almost the perfect mix, or rather the perfect storm, in terms of the difficulty of planning for this from a business perspective.”

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