There are just days to go before the UK is due to officially depart from Europe but have we reached crisis point?
Here, FBC Manby Bowdler Brexit Director Peter Wilding looks at the latest situation and asks so what now?
We have reached peak crisis. Eight days from the due date of departure, businesses in the Midlands can’t help but ‘sit tight’ as many of our clients tell me they are doing.
But is this the wise or indeed the only approach, given where we are? That depends on two simple questions.
First – are we closer or further away from no deal?
No deal would genuinely upend the legal and commercial foundations of those businesses which directly or indirectly export or import with the European Union and the 40 non-EU states with which the EU has trade agreement, not forgetting those businesses whose products rely on compliance with European standards.
No deal would require an immediate legal and administrative reaction to ensure commercial contracts are enforceable, customs and tariff procedures are in place, VAT and other tax implications are managed and products or components of products are compliant with EU and UK standards regimes.
Second – are we closer or further away from the May deal?
If the PM’s deal eventually passes, those businesses’ foundations will remain but only until the transitional period expires with the enactment of the future trading arrangement with the EU.
During that time the British government will be negotiating in secret the terms by which UK products will gain access to the EU market.
The one certainly is that access will be less than it is now and subject to more friction.
We will return to the critical commercial problems – which FBC Manby Bowdler has comprehensively covered in its website briefings – when the dust settles?
First let’s answer these questions jointly.
The current mood in Brussels is to reject May’s request for a June 30 extension and instead offer a shorter delay until May 22, the last day before European parliamentary elections are due to begin.
The eight-week delay would be conditional on the PM’s deal passing parliament next week, as Donald Tusk set out yesterday.
That deal will probably be put to the vote, despite the Speaker’s bombshell intervention, on Tuesday.
Not doing so would deepen the political crisis. Moreover, by enabling the vote, amendments will be tabled to either agree the deal subject to a referendum or a change in the political declaration or – the nuclear option – for MPs to seize control of the process.
If the May deal is defeated or changed in a way which requires a longer extension than merely eight weeks, an emergency EU Council Summit will be convened next Thursday (March 28) when leaders will decide what to do next.
The expectation is they would revoke the offer of a short delay and instead hand Britain a much longer extension.
A statutory instrument is ready to be tabled in the UK to change the departure date. That longer extension would be granted on the understanding Britain takes part in the European election on May 23, and that the Withdrawal Agreement is not going to be reopened under any circumstances.
Further conditions namely a general election, a second referendum or a cross-party deal may be added.
If the political crisis worsens in ways not relevant to the deal such as a lost vote of no confidence, the resignation of the Prime Minister or the implosion of the cabinet as half push for no deal and the other half for a long delay, few diplomats really believe the EU is going to force Britain out without a deal next Friday, unless the British PM actively wants such an outcome.
For all the aggressive rhetoric from nations like France and Belgium, the overriding view is that in the end EU27 nations do not want to be blamed for the impact of a no-deal Brexit, do not want to throw Ireland under a bus, and frankly are hopeful of a better outcome if they delay.
So, what’s the likelihood?
I think no deal will not happen next Friday even if, as expected, May’s deal fails to garner a majority.
Parliament will step in – with the Speaker’s connivance – to request a long delay of perhaps 21 months or to make May’s deal subject to a referendum or perhaps to revoke Article 50 entirely if we are still nowhere at 10.59pm on March 29.
Politics has a habit of bowling googlies though, particularly as the Prime Minister is now in her bunker and thrashing out against what she sees as this perfidious Parliament.
It is entirely possible she will call an election for May 2. But for that she still needs an extension. And for that, currently, her vote must pass.
Yes, ‘sit tight’. But be prepared for anything.