A No-Deal Brexit Seems Less Likely, but It’s Still Taking Its Toll on U.K. Retailers and Auto Makers
The U.K. opposition Labour Party is now officially backing a second Brexit referendum after Parliament turned down its alternative plan for the country’s divorce from the EU.
Labour’s plan would have seen the U.K. enter into a permanent customs union with the EU and align many of its policies with those of the bloc’s single market. It was defeated by 323 votes to 240 and—as the party revealed a few days ago—that means Labour now supports a fresh “People’s Vote” on Brexit.
“We will back a public vote in order to prevent a damaging [Conservative Party] Brexit or a disastrous no deal outcome,” said party leader Jeremy Corbyn. ”We will also continue to push for the other available options to prevent those outcomes, including a close economic relationship based on our credible alternative plan or a general election.”
Labour’s plan wasn’t the only idea to come to a vote on Wednesday evening. All but 20 of the U.K.’s sitting parliamentarians backed a delay of the March 29 Brexit date if the alternative was clearly a no-deal exit.
Goldman Sachs responded by revising its odds for the Brexit outcome. The bank now thinks the likelihood of a no-deal Brexit is only 10% rather than the previous 15%, and the chance of a delay is up from 50% to 55%.
The possibility of a no-Brexit outcome remains at 35%, Goldman said—a likely reflection of the fact that, even if Labour now backs a second referendum, the ruling Conservative Party most certainly does not.
However, even if the odds of a delay to the Brexit date have gone up, the extension is not something the U.K. can unilaterally declare—the 27 remaining EU member states also have to approve it, and for that the U.K. will need to give a good reason for its request.
As things stand, negotiations ended months ago, and although Prime Minister Theresa May has repeatedly begged her EU counterparts for tweaks to the deal that would allow her to get it past her Parliament, she has had no luck. That’s largely because May has refused to give up her self-imposed red lines, such as her opposition to a future customs union between the U.K. and the EU.
“We would support an extension request only if it was justified by a new choice of the British,” warned French President Emmanuel Macron on Wednesday. “But we would in no way accept an extension without a clear objective.”
“If Great Britain needs more time we will not oppose it but of course we are seeking an orderly exit,” said German Chancellor Angela Merkel at the same press conference.
Whether or not a no-deal Brexit becomes an unwelcome reality, its specter is already taking its toll. New figures released Thursday by banks and building societies showed consumer confidence in the U.K. was at a seven-year low and house-price growth was almost flat.
Meanwhile, the high-end British carmaker Aston Martin used a poor results announcement to warn that a no-deal Brexit was already hitting it hard, due to the lead time on production, which means cars being built now can only be shipped after March 29.
“From our point of view, a no-deal Brexit isn’t something that is in the planning or might happen,” CEO Andy Palmer told CNBC. “No-deal Brexit has already happened for us.”