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 prolong—if not deepen—the 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.