A Long Brexit Delay Seems Likely, but to What End?

Brexit negotiations are once again going to the wire. With no resolution in place and the clock ticking down, Sandy Nairn, chairman of Templeton Global Equity Group and CEO of Edinburgh Partners, looks at the possible outcomes. He explains why he thinks a long Brexit extension could be the most sensible option, and why he feels the deadlock might only be broken by a fresh plebiscite.

As the continuing turmoil over Brexit has amply demonstrated, illogical outcomes are entirely possible when you have competing interest groups with entrenched views on vital elements of the negotiation.

This fragmentation explains the inability of UK members of parliament (MPs) to reach a majority view on any individual Brexit solution. It also amplifies the looming danger of a default to the one outcome—“no-deal exit”—that the overwhelming majority of MPs wish to avoid.

As a consequence, we think, it is highly likely that some form of plebiscite or new vote will be required to break the deadlock.

The simplest, in our view, would be the so-called “people’s vote,” in which voters decide between the competing options. An alternative would be a general election, which would open up a host of other considerations.

In either of these cases, we regard an extended delay to Brexit as almost inevitable.

A Delay, but for How Long?

UK Prime Minister Theresa May has made an official request to extend Article 50 until June 30. We’re skeptical that the EU leaders would countenance such a short delay unless they were convinced agreement on a deal was pending.

On the other hand, various parties, including President of the European Council Donald Tusk, German Chancellor Angela Merkel and the Irish government, appear strongly in favor of offering the UK a long extension.

France’s President Emmanuel Macron appears less keen—partly because of concerns over the disruption that anti-EU populist parties might cause in the upcoming European Parliament election, and partly because he sees significant upside for Paris from a potential shift in financial services from London.