Brexit: this is going to happen now

The British House of Commons has voted down Prime Minister Theresa May's deal for the second time. There is therefore a very good chance that the government will now aim for a postponement of the departure from the European Union (EU).

On Tuesday 12 March, the British House of Commons again put a big line through the agreement that May concluded last year. A few hastily added inserts and the escape mechanism for an open border solution between Ireland and Northern Ireland were far from enough to change parliamentarians' minds.

The agreement with the EU was therefore voted down: 391 votes against and 242 votes in favour. The difference of 149 votes was slightly smaller than the 230 votes that May lost in January. The huge gap does indicate that new negotiations are of little use. Meanwhile, the clock is ticking. The UK will leave the EU on March 29, in just over 2 weeks.

Price tag of €300 billion
Without an agreement with the EU, Brexit risks turning into chaos. If the borders close overnight, the United Kingdom (UK) will enter a recession. The British Court of Audit has already calculated that the economic damage in the coming years will amount to approximately €300 billion. Of course, no politician wants that on his conscience.

The Conservative Party already lost its majority in the House of Commons in the 2017 elections. With a hard Brexit, a painful defeat in the 2022 elections is almost inevitable. The party can already take an advance on avoiding that scenario. On Wednesday 13 March, there will be a vote on a motion to prevent a chaotic departure from the EU.

This is how we prevent a hard Brexit
A hard Brexit can be averted in two ways. Prime Minister May must negotiate with the EU about a postponement of the departure, although Prime Minister Mark Rutte said very quickly on Tuesday 2 March that the country would have to come up with very good arguments. The other option is to resubmit the so-called 'Article 12' and start the procedure from scratch.

There is a good chance that the British House of Commons will choose a route on Thursday 14 March. The pound took a hit when it became clear that the agreement was heading for another defeat. Tuesday night you got just €1,156 for £1, while it was still €1,177 on Tuesday morning. With a view to today and tomorrow, there is a good chance that that damage will soon be repaired.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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