Back in August, U.K. PM Boris Johnson asked the Queen to suspend the Parliament for a month in what was characterised as an unprecedented and unconstitutional move. Boris’ aim was to ensure that the Parliament would not interfere with his plans to proceed with Brexit on Oct 31st with or without a deal.
The Parliament Goes Out with a Bang
However, the Parliament responded by passing a last-minute law preventing a no-deal Brexit, according to this law, Boris would be forced to ask for another Brexit extension. On Monday, Sept 9th Boris’s plea for an early election was rejected while his aides were forced to disclose their private communications on all matters concerning the suspension of Parliament. After a dramatic week full of intrigue, votes and resignations, the U.K. Parliament was suspended on Monday, Sept 9th. But the recent political turmoil has left us with more questions than answers.
So what happens next?
On the one hand, Boris is definitely running out of options and will likely be forced to ask the E.U. for another extension. On the other hand, Boris has pledged to deliver a Brexit this year no matter what. Could he surprise the markets and find a way to force Britain out of the EU on Oct31st?
As it stands, the U.K. is still due to leave the EU on October 31. A majority of Parliament voting to block a no-deal Brexit does not mean that it can’t still happen. For starters, the EU would have to agree to grant another delay to the U.K.; and there are already grumblings from the continent that the U.K. has not presented valid reasons for requesting more time. If the EU does decide to grant the U.K. another extension, the GBP and other U.K. assets are seen firming on the news as this gives the U.K. more time to bargain for a favourable deal.
Despite Parliament voting to block a no-deal Brexit, Johnson has repeatedly said he would still try to take the U.K. out of the EU on October 31st. In this case we would expect the GBP to plummet along with key U.K. risk assets and the FTSE.
Johnson has insisted he wants a deal and would use the time that Parliament remains suspended to continue last-ditch talks with Brussels to get over the major stumbling point which is none other than the Irish “backstop.” It is unlikely that they will manage to find a solution in such a short period of time and even a quickly patched Brexit deal would still cause uncertainty in the markets with both E.U. and U.K. assets seen turning bearish.
Another Early Election?
With Parliament also suspended now until October 14 and the no-deal Brexit legislation in place, most Brexit watchers now see a snap election as likely to happen in November, after a possible delay to the departure date. Alternatively, opposition parties could even unite to try to bring about a second referendum.
Sources: CNBC, BBC, Euronews, Sept 13, 3:30 PM GMT.