16 Jan

ABCC Brexit Update – 16 January 2019 - Brexit Deal Rejected as PM May Suffers Historic Defeat

By Paul O’Hagan, General Manager,VIC, WA, SA
Australian British Chamber of Commerce


  • In a historic defeat, PM Theresa May’s Brexit Deal was overwhelmingly rejected by MPs by 432 votes to 202.
  • Immediately after the vote, PM May accepted Labour leader Jeremy Corbyn’s tabling of a vote of no-confidence in the Government.  The vote is expected to be held at 7pm GMT on Wednesday (6am AEST on Thursday).
  • With backing from her own party and the Democratic Unionists, PM May is expected to survive the vote of no-confidence. May is expected to bring a “Plan B” to Parliament on Monday 21 January.
  • With no parliamentary consensus on how to proceed, PM May offered the prospect of cross-party talks following a win of the vote of confidence.
  • EU leaders have expressed regret and urge the UK to clarify its position.
  • With some investors believing the chance of a No-Deal outcome has diminished, Sterling has regained ground after declines of more than 1% yesterday.
  • Possible outcomes still include:  A “No Deal” Brexit; Renegotiation with the EU; a General Election; and a Second Referendum.
  • The UK is still scheduled to leave the European Union on 29 March unless UK parliamentarians vote to delay or cancel Brexit.

A Defeat of Historic Proportions

Following two years of negotiations with the European Union, PM May’s Brexit Deal was overwhelmingly rejected by MPs in the largest loss for a sitting government in history.  With a margin of 230 votes, 432 MPs voted to reject the deal whilst 202 voted in favour. 

Immediately after the vote, PM May addressed the House of Commons.  Acknowledging the scale of the defeat, May accepted Labour leader Jeremy Corbyn’s intention to table a vote of no-confidence in May’s Government. 

The confidence vote is now expected to be held at 7pm GMT on Wednesday (6am AEST on Thursday).  PM May is expected to survive the confidence vote after both pro-Brexit and pro-Remain Conservatives along with MPs from the Northern Irish Democratic Unionist Party signalled their backing of the Prime Minister. 

Under the UK’s Fixed Term Parliaments Act 2011, general elections held every five years, with the next one scheduled for 2022.  Should a sitting government lose a vote of no confidence, however, a countdown period of 14 days commences.  If the government is unable to win a subsequent vote of confidence in this time period, an early general election would be called and cannot take place for at least 25 working days.  With the UK still scheduled to depart the EU on March 29, a development such as this would require an extension of Article 50 (the EU’s secession clause).  After surviving an internal Conservative Party vote of confidence in December, May is immune from subsequent party votes for one year.

How are the Markets Reacting?

Surprisingly to some, Sterling rose 0.08% to $1.287 (USD) after more than 1% of a decline yesterday. Whilst uncertainty prevails, some investors may see the outcomes differently. According to Jeremy Stretch of CIBC Capital Markets, “The probability of a no deal has diminished while the chances of a delay in Article 50, a second referendum or even, at the margin, no Brexit at all, have all increased.  The consequence of those scenarios has encouraged Sterling to rally despite the PM suffering the worst parliamentary result in a century.”

What Happens Next?

Whilst there was overwhelming agreement amongst MPs to reject PM May’s Brexit deal, there is no consensus on how to proceed over Brexit.  Parliament still remains deeply divided amongst the following groups:  those advocating a Hard Brexit (with the UK outside the EU’s Single Market); a softer Brexit (along the lines of the Norwegian relationship with the EU); a General Election; a second referendum; and no Brexit at all. 

In her response to the House of the Commons, May offered the prospect of cross-party talks should she win the vote of confidence on Wednesday.  While this was welcomed by some in her party and the Opposition, it is still hard to see how any consensus could be built which would both pass a parliamentary vote and the EU’s approval.  EU leaders have been quick to express their regret on the vote’s outcome and have called on the UK to provide clarity in its intentions.  Unless there is a change of course, the UK is still scheduled to leave the EU on 29 March. Following the successful vote of confidence, PM May is expected to bring a “Plan B” to Parliament on Monday 21 January.

Whilst no one can predict the outcomes of this week’s parliamentary events, there are ultimately only a number of possible outcomes:

  • “No Deal” Brexit on 29 March – the default outcome unless the UK Parliament votes to delay or cancel Brexit.  There are differing views on the ramifications of such a scenario with the Government claiming it would cause significant and widespread disruption to the UK economy and pro-Brexit MPs saying that in the longer term, it would be more beneficial. 
  • Renegotiation with the EU – requiring an extension of Article 50 and some form of consensus on the UK side following the cross-party talks.  While the EU has rejected such a solution, a “No Deal” scenario would likely cause significant economic disruption to EU member states - possibly bringing the EU back to the table.
  • A lost Vote of Confidence – as mentioned, this is still unlikely given the backing of May’s MPs and the Democratic Unionists.  A lost vote would result in May’s resignation and a General Election.
  • May Calls a General Election – to secure a mandate for a way forward.  Whilst ahead in the polls, there is no guarantee the Conservatives would secure a majority.  This course of action would require an extension of Article 50 and for the time being is unlikely.    
  • Another Brexit Referendum – would also require an extension of Article 50 as under electoral rules, it is too late to hold a national referendum before 29 March.  Such an outcome unlikely for the time being with current polling suggests that the country is still deeply divided on Leave/Remain lines.

With so many differing outcomes, it is becoming increasingly likely that some form of an extension to the Brexit deadline will occur.  Commentators note the possibility of a three-month “technical” extension.  Any longer extension would encounter difficulty as the next European Parliament elections are due to take place in May and the UK would be expected to field parliamentary candidates in the midst of Brexit.   

The ABCC and Brexit

The ABCC will continue to follow these developments closely in the coming weeks and months.  We look forward to keeping members up to date with the very latest from London and what it possibly means for the Australian-British business community.  Should you have any questions, please feel free to contact our office on abcc@britishchamber.com.

Posted in General by Anonymous
vin steelson said

It is a great pity that a supposed enlightened and developed country which was the founder of a great empire during past centuries, cannot grow big enough cohunas to break the ties with a disparate tribal conclave such as the EU.  History has shown that the various countries in Europe are incapable of living together on a long term basis. The EU is ddomed to fail and is on life support from Germany (with its self interest paramount).  The sooner the UK breaks of with them and forges trade and political links with countries like US, Canada, Australia, Japan and the like, the sooner they will become a high ranking power, world wide.  Supplication is not the lifeblood of longevity, only the salve that offers a short term soothe.

Leave a comment