MPs Say No to No Deal, but an Accidental Hard Brexit Remains a Possibility

Some commentators have described March 13 as the most important day in the Brexit saga since the June 2016 referendum. UK members of parliament have voted to reject a situation in which the United Kingdom crashes out of the European Union without a deal. But with only days until the official leave date, the options for a tidy resolution are limited. David Zahn explains why he expects the UK government now to seek an extension to the Brexit negotiations and he offers some thoughts on what that might mean longer term.

UK members of parliament (MPs) have voted to reject a no-deal Brexit. But an “accidental no-deal” Brexit remains very much on the cards.

We believe there’s still a very real chance the United Kingdom could crash out of the European Union without an agreement on the post-Brexit relationship.

But in the short term, we expect a positive reaction from markets to the decision to rule out no deal—at least until the next development.

Following the parliamentary vote to reject no deal, we think the logical next step would be for the UK government to seek to push back the March 29 leave date to allow further talks to take place.

UK Prime Minister Theresa May has indicated she will have one last attempt at persuading MPs to support her withdrawal agreement in the coming days. However, the House of Commons has already overwhelmingly rejected that proposition on two occasions, including earlier this week.

Separately, MPs will be given the opportunity to approve a request for an extension of negotiations. If they choose not to, we could find ourselves in the impossible position that MPs have rejected all the possible options: a negotiated deal, no deal and an extension of talks.