Our Opinion: 2019

UK Election looms as no-deal Brexit blocked for now

UK lawmakers have voted in favour of legislation that will compel the government to ask for an extension of the Brexit deadline if a deal is not agreed by 19 October. Frustrated by the passing of the bill, Boris Johnson tabled a motion calling for a general election. As expected, members of Parliament (MPs) rejected this proposal, but it is likely the prime minister will continue to push for it before Parliament is prorogued (suspended) next week.

Predicting the outcome of a general election at this stage is fraught with challenges. Much will depend on the timing, alliances (if any) between parties, the prevalence of tactical voting in constituencies, and the domestic policy agenda. In terms of what it means for Brexit, if a Conservative government were to win the election, the chances of a no-deal Brexit would increase significantly. If Labour emerges victorious either on its own or as part of an alliance with the SNP and the Liberal Democrats, then the UK faces the prospect of a second Brexit referendum.

Sterling has been buffeted by the frenetic pace of events in Parliament over the last couple of days. Removing the immediate threat of a no-deal Brexit has helped the pound recover some of its recent weakness. If, as we expect, Brexit is delayed until January 2020 and an election is held after October, we would expect this recovery to continue. The key risk to this view is an early general election (in October) and a victory for Johnson’s Conservative party.

It came as no surprise that MPs voted overwhelmingly in favour of the Benn bill that requires the government to seek an extension to the Brexit deadline if an agreement cannot be reached by mid-October. The size of the defeat for the government the previous evening, and the stripping of the whip from 21 Conservative MPs, lent an air of inevitability to Wednesday evening’s proceedings.

Of course, this bill is not yet enshrined in law. It now has to pass through the House of Lords and then receive Royal Assent. The government is making a determined effort to filibuster the bill in the Lords, but our sense is that it will fail. We therefore expect that the bill will become law before Parliament is prorogued next week.

Although MPs have succeeded in passing legislation that blocks a no-deal Brexit at the end of October, it does not mean it cannot still be the case. If somehow the government manages to engineer a general election before the end of October and proceeded to win the ballot, then it could be expected to overturn Wednesday evening’s decision.

Johnson has always denied that he is seeking a general election. As we have written before, with a slim parliamentary majority—one that has now gone—we never believed this position to be credible. An election is coming; indeed, Johnson is now calling for one. The key question is: when?

The government’s preferred date for an election has emerged as 15 October. This would suit Johnson because, if he wins, he would not be required to ask for an extension to the Brexit deadline, and he could fulfill his promise to voters that the UK will be leaving the European Union on 31 October.

Moreover, Johnson also claims that this would also allow him time to agree a deal with EU leaders at the European Council meeting on 17–18 October. In our view, this claim is questionable given the lack of evidence so far of a willingness to negotiate a deal.

A problem facing the government, as we have seen from Wednesday’s vote against holding an election, is that the prime minister cannot just call an election. The Fixed Term Parliament Act requires two-thirds of MPs (434 members) to support such a motion. Thus, to secure an election, Johnson will have to rely on opposition MPs. Until the Benn bill is passed into law, it is

unlikely that MPs will lend Johnson their support. And even when the bill does become law, it is still not obvious that MPs would be willing to allow a general election before 31 October for the fear that a Johnson victory could overturn the bill (as discussed above).

Given how determined Johnson is to hold an election in October, we must remain alert to the possibility that the government will find another mechanism to force an election. It could look to passing legislation with this in mind, although without a majority it is hard to see how this succeeds. The government could also call a vote of no confidence in itself, although, again, the numbers for this don’t seem in the government’s favor—not to mention how questionable it would look for a government to suggest it has no confidence in its own ability to govern.

Nevertheless, until Parliament rises next week, we remain alert to the risks that a general election in October could materialize. After prorogation, there would not be enough time to call and hold an election that month.

We have long been of the view that the UK faces an election before the final decision on Brexit is made. We stick to this view, but we now have more uncertainty about the timing.

When the election does come, it is only then that will we have greater clarity on how the Brexit saga will end. Or maybe it doesn’t end; it is prolonged even further. It will obviously depend on the result of the election, something that is hard to predict at the best of times. Voters are split on the main issue of the day: Brexit.

The only conclusion that can be drawn at this stage is that if the Conservatives win an election or emerge as leaders of a coalition, then a no-deal Brexit becomes the most likely outcome. The one caveat to this is a large Conservative majority, as this may give the government more room to negotiate with the EU should they wish to. For example, a Conservative Party not reliant on the DUP for support might be able to get behind the idea of a Northern Ireland-only backstop. But this is pure speculation.

The alternative is the Labour party or Labour-led coalition winning the election. Under this scenario, a second Brexit referendum is more likely, which may ultimately result in overturning the original ballot. But this means that closure would remain some way off.

4th September 2019