7th MAY 2020 - Page 16



30
Business INsight
TUESDAY JANUARY 29 2019
www.irishnews.com
business@irishnews.com
n BORDERLINE: -As has been the case for some time now, the only thing we can
say with any certainty on Brexit is that there is still a lot of uncertainty
The road Brexit
might lead us down
I
T’S NOW just over eight weeks
until the UK is scheduled to
leave the European Union.
But despite there being so little time left between now and
March 29, there is still no clear path
by which the exit will occur.
The prime minister’s draft withdrawal agreement – the result of 20
months of negotiations between the
UK and the EU – was overwhelmingly rejected by the House of Commons and no clear alternative has
as yet emerged. And for businesses,
this lack of clarity around Brexit remains a significant challenge.
Despite there being no agreement
on how the impasse should be resolved, there are a number of possible scenarios that could come to
fruition over the coming weeks or
months. While not an exhaustive
list, some of the main options are
a no-deal Brexit, a general election,
moving towards pursuing membership of the European Economic Area
(EEA), a second referendum or a variant of the draft withdrawal agreement eventually being approved.
At present, a no-deal Brexit remains the default option. If nothing
else happens between now and the
end of March, then the UK will leave
without a deal. However, I think that
such an outcome is unlikely and it
seems clear that there is no majority in the House of Commons for a
no-deal Brexit.
The prime minister has so far refused to rule out ‘no-deal’ as an outcome, possibly because she feels
that the option of defaulting to this
ANALYSIS
Conor
Lambe
scenario, which would be detrimental to both the UK and the EU
economies, strengthens her hand
ahead of the upcoming discussions.
The problem is, however, that given
the disruption and the chaos that
a no-deal Brexit would lead to in
the UK, it doesn’t really look like a
credible threat.
Another possible option would
be to hold a general election in an
attempt to break the parliamentary
deadlock on Brexit. However, this
too seems an unlikely scenario. The
government recently survived a vote
of no confidence in the aftermath of
the vote on the draft Brexit deal, and
would probably survive another one
if triggered.
The government could move towards pursuing membership of the
EEA as the long-term, future relationship between the UK and the EU in
an attempt to win backing from MPs
who support a soft Brexit or who
voted to remain in the EU. This is
often referred to as the Norway-option. It would see the UK remain in
the single market meaning the freedom of goods, services, people and
capital would continue to hold, the
UK would continue to follow single market rules (though without
a direct say in deciding them) and
would still make some contribution
to the EU budget. It is also suggested
that the UK could seek membership
of a customs union alongside EEA
membership. However, if Brexit were
to result in such a close relationship
with the EU, it would beg the question, would it not just be better to
remain a full member?
There have also been calls for a
second referendum. We know that
there is not currently a majority in
Parliament for the draft withdrawal agreement as it stands now and
it seems that there isn’t a majority for ‘no-deal’. But what we don’t
know is what there is a majority
for, if anything. Therefore, there is
an argument that if MPs can’t reach
an agreement on how Brexit should
proceed, then the question should
be directed back to the electorate. However, a second referendum
would present challenges. It would
take time to set up and it isn’t immediately clear what the question
would be.
That leaves us with a variant of the
draft withdrawal agreement eventually being approved which, in my
opinion, is just about the most likely outcome. In the days and weeks
ahead, the prime minister looks set
to go back to the EU to try and make
some changes to the draft agreement. These discussions are expected to revolve around the Northern
Ireland back stop and the political
declaration on the future relationship between the UK and the EU.
There is no doubt that these discussions will not be easy but the
two sides are likely to reach some
agreement in an attempt to move the
Brexit process forward. With Parliament set against a no-deal Brexit,
there seeming to be little appetite
for another election or a second referendum, and little point in opting
for a Norway-style Brexit over full EU
membership, it’s quite possible that
the House of Commons and the various factions within it will decide to
approve an amended version of the
draft withdrawal agreement as the
only viable, and least unappealing,
option.
One thing which I haven’t mentioned yet is the possibility of an
extension to the Article 50 process.
If we were to find ourselves in one
of the second referendum or general
election scenarios then the Article
Despite there being no agreement on how the impasse
should be resolved, there are a number of possible
scenarios that could come to fruition over the coming
weeks and months
50 process would have to be extended in order to allow time for that to
happen.
Also, if a variant of the draft withdrawal agreement is to be approved,
there is a possibility that, given how
little time there is between now and
the end of March, that an extension
will be needed to give enough time
for the UK and EU to engage further
on the draft agreement and for it to
go through the full ratification process. However, it’s not clear whether
such an extension would be for a few
weeks to finalise the approval process, or for a longer time period to
allow more time to discuss the draft
deal. It’s also important to note that
an extension requires unanimous
support from the EU.
As has been the case for some
time now, the only thing we can say
with any certainty on Brexit is that
there is still a lot of uncertainty.
While some of the options discussed
above are more likely than others,
they are all possible outcomes. This
prolonged lack of clarity is a real
challenge for businesses, and it is
important that they keep monitoring
the process closely and working on
their Brexit preparations.
With a vote on the prime minister’s
intended way forward, as well as a
number of amendments, set to take
place in the House of Commons on
Tuesday, let’s see what this week
brings in this highly uncertain Brexit
process.
n Conor Lambe is chief economist at
Danske Bank
n Next week: Brendan Mulgrew

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