The Daily Update - Division! Clear the Lobby

Yesterday evening, in what many expect to be a pyrrhic victory, Theresa May achieved her Hail Mary pass by holding off the Cooper and Grieve amendments. It came at a cost. First, she whipped her party against her own Withdrawal Agreement towards the Brady amendment which demands she now renegotiate an “alternative arrangement” to the backstop. Second, she promised to bring whatever (un)altered deal the EU are willing to offer back to the house for a vote on the 14th of February.

With the Spelman amendment also passed, MPs were able to get their opposition to a no-deal Brexit on record, finally giving Jeremy Corbyn cause enough to engage with the PM, but also perhaps increasing the odds of the very thing the amendment is against. For if the deal returns with scant concession from the EU, more (Labour) MP’s may be brazen enough to abstain or even vote against the deal, passing blame on the Tories for whatever political and economic chaos ensues. More likely, a large number of Labour abstentions would allow May’s supporters and Tories fearful of no-deal to far outnumber the European Research Group hardliners. Of course this still doesn’t mean there won’t be a no-deal Brexit come the end of 2021 and the transition period.

Politico put it this way, “MPs voted for a symbolic motion signaling their opposition to a no-deal Brexit, but against taking on powers to actually stop it.” One of the things that may have tipped the vote in the PM’s favour was the heralding of the two proposals from the Malthouse compromise – that saw Remainers like Damian Green and Nicky Morgan, and Brexiteers Jacob Rees-Mogg and Steve Baker heed the Queen’s advice to “seek out the common ground”. Although the proposal has already been greeted with immediate scepticism from EU officials as unworkable their efforts, in yesterday’s accompanying press offensive, to encourage “Leavers and Remainers… to come together so UK flourishes outside of the EU post Brexit” were admirable (Mogg and Green appealing to the Sun readership whilst Morgan and Baker entreated in the Telegraph).

At 1.31 against the dollar, Sterling remains up +2.8% year-to-date and only one cent or -0.8% off recent highs. It seems then, markets expect eventual approval of the Withdrawal Agreement rather than a no-deal scenario: with either the EU offering some minor concession that May can purport as a “significant and legally binding change”, or more likely she fails but Labour largely abstain on the 14th of February (instead of voting against to stick it to the Tories at the expense of a no-deal Brexit). Given that EU documents suggest that they will pursue definite contingency measures from 15th of February onwards, it seems that the current proposed timing will put pressure on MP’s to accept May’s deal or else. Although, as we’ve seen, none of the alternatives are off the table until the deal is done, and there are still plenty of advocates behind an extension or a softer Brexit even if they, and especially a second referendum, look less likely after yesterday's results.

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