Thought April 11, 2019 / 12:00 pm UTC

Brexit: She Did It Their Way

By Andrew Wroblewski

A widely-expected further Brexit extension is suited more to the EU's needs than the UK's. It avoids a cliff-edge Brexit, but only for now. Indeed, the added six months may further complicate the Brexit process and shorten the vital, already-limited Transition Period needed to avoid another cliff-edge developing.

The six-month Brexit extension is a EU27 compromise encompassing internal differences as to whether a longer or shorter delay actually puts more pressure on the UK to decide its next step. PM Theresa May was in a take-it-or-leave-it position and had to agree to this compromise, which will only prolongif not deepenthe uncertainty overhanging the economic outlook. 

Firstly, the delay is only going to undermine May even further, damaging her bargaining authority with Parliament and possibly threatening her leadership. Secondly, it may also make it harder for Parliament to agree to a Brexit deal, as the added six months raises the logistical possibility of a fresh referendum.

Indeed, it seems no clearer how Parliament can or will resolve the dilemma underlying the Brexit deadlock, namely agreeing on what the future trade relationship (FTR) will be. To date, in the almost three years since the referendum, Parliament has been unable to agree on a FTR needed to leave the EU, even though any such agreement would be non-binding. 

On the heroic assumption that an agreement is made by October 31, only then will the real bargaining regarding the FTR actually begin, i.e. when formal trade talks with the EU will start. This is when the real struggles in agreeing to a FTR will occur, as whatever is decided will be legally binding. Moreover, given the Brexit extension, the UK will have just 15 months to reach a conclusion in order to avoid a potential fresh cliff-edge at the end of 2020.

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I, Andrew Wroblewski, the lead analyst certify that the views expressed herein are mine and are clear, fair and not misleading at the time of publication. They have not been influenced by any relationship, either a personal relationship of mine or a relationship of the firm, to any entity described or referred to herein nor to any client of Continuum Economics nor has any inducement been received in relation to those views. I further certify that in the preparation and publication of this report I have at all times followed all relevant Continuum Economics compliance protocols including those reasonably seeking to prevent the receipt or misuse of material non-public information.