Why Boris Johnson's Brexit Deal Faces an Uphill Battle

Could the long nightmare that has been the run-up to Brexit finally be over? Perhaps—but quite possibly not.

On Thursday, Prime Minister Boris Johnson emerged victoriously from last-minute talks with his EU counterparts. A new agreement had been struck that would allow for the U.K.’s orderly departure from the bloc. Jean-Claude Juncker, the president of the European Commission, recommended to the EU’s other 27 member states that they agree to it.

But we have been here before. Theresa May, Johnson’s predecessor, also scored a deal with the EU—only to see it rejected by her own Parliament not once, but three times.

So what lies in store for Johnson’s deal?

What’s new?

The primary poison in May’s deal lay in the so-called Irish backstop—essentially a contingency plan for what would happen if the U.K. and the EU failed to agree a new trading relationship by the end of the Brexit transition period.

Everyone is desperate to avoid a hard border between Ireland and the U.K. province of Northern Ireland, as few, particularly the communities straddling that currently meaningless line, want a return to the violent times that preceded the EU-backed 1998 Good Friday Agreement. But without a U.K.-EU trading agreement, there would have to be a border somewhere, for customs checks.

May’s deal skirted the problem by saying that, until a trading agreement materialized, the U.K. would remain entirely in the EU customs union, with Northern Ireland also sticking to the regulations of the EU’s single market (covering standards and so on.)

Hardcore Brexiteers rejected this because they felt it meant the U.K. could not truly leave the EU—it couldn’t strike its own trade deals while being part of the EU customs union. Moreover, Northern Ireland’s Democratic Unionist Party (DUP, which has been propping up the Conservatives’ minority government) said no because it meant Northern Ireland would be treated differently from the rest of the country.

The new draft withdrawal agreement does not describe an insurance policy; it sets out a new, permanent way of doing things.

For starters, Northern Ireland would remain in the EU’s single market, with all its regulations. That means goods coming into Northern Ireland from the rest of the U.K. would be subject to EU tariffs if they might then enter the Republic of Ireland. But Northern Ireland would be part of the U.K.’s customs territory as well, allowing for it to participate in the trade deals that Brexit fans are so keen to strike around the world.

Negotiators also agreed that Northern Ireland would follow EU rules on value-added tax (VAT)—the final sticking point in the talks.

Because the new arrangement would be permanent, it would, every four years, allow Northern Ireland’s regional government to re-consent to it. Easier said than done. Currently, Stormont (as the devolved assembly is known, due to its location in that area of Belfast) is not functioning as disagreements between the DUP and its main rival Sinn Féin mean it hasn’t convened since the start of 2017.

What’s the reaction?

Johnson, of course, is jubilant. “We’ve got a great new deal that takes back control,” he tweeted, urging the U.K. Parliament to give its approval in a special session on Saturday.

His main political rival, the Labour Party leader Jeremy Corbyn, begged to differ. “From what we know, Johnson’s negotiated a worse deal than Theresa May…it won’t bring the country together and should be rejected,” he tweeted. Corbyn has long insisted that Labour could come up with a deal that would better protect workers’ rights and environmental standards, once EU rules cease to apply.

So Labour won’t be on board, except perhaps for a few party rebels.

Crucially, the DUP won’t vote for it either. “These proposals are not, in our view, beneficial to the economic well-being of Northern Ireland and they undermine the integrity of the Union,” the Northern Irish party said in a statement.

As for the resolutely anti-Brexit Scottish Nationalist Party (SNP), party leader Nicola Sturgeon said Thursday: “It’s hard to imagine a deal that could be worse from the perspective of Scotland’s interests.”

That will be a “no” then.

What about the ardent Conservative Brexiteers who voted against May’s deal? At least eight of them have indicated that they will back Johnson’s version. However, the Brexit Party of Nigel Farage—who poses a serious threat to the Conservatives’ electoral hopes—doesn’t see Johnson’s deal as a winner. “The commitment to regulatory alignment in this agreement means that the ‘new deal’ is not Brexit, despite improvements on the customs union,” Farage tweeted.

And then we have the 21 members of the Conservative Party that Johnson expelled for disloyalty in early September. Especially with the DUP not being on board, it is difficult to see how the deal could pass Parliament without support from at least some of those people.

Indeed, it is far from clear that Parliament will green-light the agreement.

And the markets? The pound sterling initially soared on the news, but then sank just as fast as critics to the deal weighed in. In mid-afternoon trade, it regained its footing, up 0.34%. Britain’s FTSE 100 was up nearly 0.6% to 7,208.71.

What happens next?

Even if the deal gets enough votes in Westminster, it is possible (for British procedural reasons) that there won’t be enough time before the current October 31 Brexit deadline for it to be ratified and enter into force. That means Johnson may still have to ask for an extension, as he is legally obliged to do in order to avoid a no-deal Brexit at Halloween.

Commission President Juncker said on Thursday that the EU would not agree to another extension, and it was this deal or no deal—music to Johnson’s ears. However, it is really up to the 27 remaining EU countries, not the Commission, to decide whether or not to accept an extension request.

If Parliament rejects the deal, Johnson is obliged by the Benn Act—an anti-no-deal piece of law recently passed by Parliament—to ask for an extension. That extension would need a serious justification, which would most likely be a general election.

In that election, Johnson would be able to say he secured a deal, against all odds, and a new Parliament with a Conservative majority is needed to make Brexit finally happen. And with his party currently riding high in the polls, he might just pull it off.

Whatever happens on Saturday, Deutsche Bank said in a Thursday afternoon note, “the important point from the market’s perspective is that avenues to a no deal Brexit have been largely closed off.”

“The only prospect of a no deal Brexit in the next three to six months would arise if a general election resulted in the Brexit Party performing sufficiently strongly to be needed to support a Conservative minority government,” it added.

But the most important point to remember is that, even if the deal goes through, it marks the end only of this phase of Brexit. Next up: years of trade negotiations, with the outcome uncertain.

Whatever happens next, this saga is far from over.