This week, the UK parliament voted that it will take over the Brexit period. This was a blow for Theresa May, who was hoping to force the MPs vote for her deal before the Friday’s deadline. It now appears that the country will remain in the European Union for a longer period as the MPs find a way forward. This will be possible because they have already voted to allow for an extension of the March 29 deadline. Starting from today, the members will start looking at a number of options.
There are many members in the left who believe that the country should go to another referendum. The questions for this referendum would be similar to those of the other referendum but they would also have Theresa May’s deal. Labor leader, Jeremy Corbyn has expressed support for such a deal but it is not likely to pass. This is because many MPs lose credibility if they vote for another referendum.
Revoke Article 50
Another option that will be deliberated is on whether to revoke Article 50. The idea is to present Theresa May’s deal to the MPs and if they oppose it, revoke Article 50. This too will likely not happen because of the Eurosceptic members in parliament. Indeed, yesterday, Jacob Mogg, who is one of the most Eurosceptic MPs said that he could vote for Theresa May’s deal. He argued that he is now presented with two options: vote for her deal or have no Brexit at all.
This option allows the UK to leave the EU without a deal but move swiftly to negotiate a new customs union deal. The customs union will help improve continuity with the way UK does business with the European Union.
Common Market 2.0
In this option, the UK will remain in the single market with the EU. It will do this by rejoining the European Free Trade Association (EFTA) and staying in the European Economic Area (EEA). To replace the Irish backstop, there will be a comprehensive customs partnership, that will allow a continued freedom of movement. The challenge with this is that it leaves the UK answerable to European courts. In the negotiations, the MPs want to make this enforceable using UK’s courts.
This is a compromise brought forward by Kit Malthouse. The goal is to pass Theresa May’s deal, without the contentious issues on backstop. Afterwards, the backstop will be replaced by other measures.
In anticipation of the deliberations in parliament, the sterling has been relatively unmoved. This is because no one knows exactly what will happen. In the yearly chart below, the pair is close to the 50% Fibonacci Retracement level. In case of a deal, the pair could reach a high of 1.4000.