Who is pulling the Brexit emergency brake?

The European Union (EU) is done with British Prime Minister Theresa May's delaying tactics. If it does not receive sufficient support for the earlier agreements, a hard Brexit is inevitable. Or not?

After several days in which tensions rose to boiling point, there was good news on Wednesday 20 March. Great Britain will not leave the EU without good agreements on Friday 29 March, although not everyone is happy with that. May began her speech by explaining the postponement and said it hurts her personally that Brexit cannot take place on March 29. Unfortunately, that wasn't all she said.

May also sneered at British parliamentarians, because she believes they are the main reason for the delay. That's not fair and clumsy. After all, it was May who put the vote on the brexit agreement always postponed. In addition, she desperately needs the members of the House of Commons in the third round of voting in the coming days. Voting is expected on Monday, March 25, and it seems likely that May will lose again.

Defeat with consequences
In contrast to the previous 2 voting rounds, the defeat threatens to have very serious consequences. Prime Minister May has asked the EU to postpone Brexit until June 30, and Donald Tusk, the president of the EU, is willing to agree. However, then May must ensure that she receives sufficient support for her Brexit deal. The EU fears that the British political struggle will continue for a few more months, with no prospect of an orderly Brexit.

When Tusk unfolded his terms, the British pound saw a massive drop. If the House of Commons votes down May's plans for the third time in a row, the risk of a chaotic Brexit is suddenly back. The British Parliament is also working hard to remove that danger; for example, there are already plans for a vote on Article 50, the departure procedure from the EU, to withdraw again.

explosive mix
The combination of the EU summit, a new round of voting in the House of Commons and a possible emergency measure to avert a hard Brexit, we are entering a few decisive days. Not just for the pound, but for May as well. A growing group of parliamentarians is becoming increasingly angry at the way in which it is delaying the voting process and allowing decision-making to arrive at the last minute.

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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