Brexit

2019: The Brexit is postponed? The Irish border - a stumbling block

After long negotiations with representatives of the European Union and prepiraniye with own government Theresa May nevertheless managed to approve the draft agreement on conditions of an exit of Britain from the EU with the European party. On January 15, 2019 this project was brought up for vote in the lower house of the British parliament, but resolutely rejected – the agreement in its current form was opposed by 432 parliamentarians, only 202 pro spoke. Due to the failure of the offered project May provided the next stage of the plan: find out what terms of agreement regarding legal position of the Irish border will allow it to get support of the Democratic Unionist Party (DUP) and to bring to reason critics from among own members of the same party. Meanwhile from ranks of parliamentarians appeals to the most different steps – from creation of permanent customs union from the EU before holding a repeated referendum are heard.

In spite of the fact that after a draft agreement failure Theresa May, appear, was ready to soften the stand on the Brexit, finally she refused to recede from the conditions of "divorce" which are originally formulated by the government with the EU (toughening of immigration control, legislative autonomy, the termination of budget payments of the EU, etc.).

Supporters of a free-lance Brexit from among conservatives warned about risk of split in a batch if Mai will recede from originally declared principles. Instead of reviewing the fundamental principles of a Brexit, Mae decided to deal closely with a problem of the status of the Irish border which disturbs both her members of the same party, and parliamentarians from the Democratic Unionist Party.

The current draft agreement provides some kind of safety cushion, so-called "backstop" is the plan within which Great Britain after a transient period automatically will be in customs union with the EU if other terms of transaction are not agreed on.

However this "abnormal" mode causes concern in parliamentarians. So, supporters of a "tough" Brexit are afraid that Great Britain can "hang up" in this mode for many years. The termination of the mode should be approved by joint committee – i.e., both the European, and British delegates should approve it. Representatives of the Democratic Unionist Party categorically against the status of Northern Ireland after the Brexit differed from the status of other regions of Great Britain. At the same time to avoid emergence of "tough" border between the Republic of Ireland and Northern Ireland, the last should remain as a part of European Single Market for the period of a transient period and to respect all rules following from here and statutory requirements. In other words, finally London still should approve the domestic policy (at least in some aspects) with the European Union and to continue to play de facto by its rules that does not suit neither supporters, nor especially opponents of Brexit.

What scenarios are possible at the moment? The chief negotiator of the European Union under the terms of a Brexit Michel Barnier, most likely, is not eager to resume negotiations on a bekstop, and already spoke of the draft agreement rejected by the British parliament as about "the best possible transaction" therefore uncertainty concerning perspectives of a Brexit remains, specialists of Coface note.

More and more probable the perspective of transfer of a Brexit for later term seems – and it is still not clear on what. The Labour Party made the offer to vote concerning holding a repeated referendum. In spite of the fact that this offer was publicly supported by 71 parliamentarians from among labourists, it will hardly be considered seriously if it is not supported by the chairman of the party Jeremy Corbyn. At this pressure upon Corbyn grows: according to data of polls, 72% of members of the Labour Party completely support holding a repeated referendum, at the same time 88% from them would vote for that Great Britain remained in the EU.

In spite of the fact that labourists do not exclude option of holding a new referendum, formally the batch supports formation of customs union with the EU. The European Union also for certain would support this softer option of a Brexit meaning preserving of close ties between Britain and the EU. Creation of permanent customs union looks at present the most probable option of succession of events as this step will be supported for certain by both moderate labourists, and conservatives whom the second referendum or free-lance does not organize a Brexit.

Though the scenario of a free-lance Brexit is improbable, it is impossible to exclude it nevertheless. If Britain leaves the EU without agreement, the economy of the region will strongly suffer – it is possible to expect decrease in the index of consumer confidence, depreciation of pound, decrease in volumes of private consumption, growth of rates (at the same time growth of the imported inflation and decrease in export volumes) and interruptions in the international supply chains. First of all the automotive industry, retail, agricultural industry and the construction industry will suffer. Also "tough" Brexit will strike the European countries exporting considerable volumes of the products to Britain – first of all it will be Belgium, the Netherlands, Ireland and also the countries of Northern and Eastern Europe.

2018: What can the political crisis in Britain turn back for the Eurozone? Coface overview

On November 19, 2018 it became known that all 27 EU countries supported the draft treaty on an exit of Great Britain from the Eurozone offered by Theresa May and earlier approved by the British government. Now Theresa May should get support of parliament. It is not excluded, however, that the office of the prime minister and parliamentarians will not manage to reach unity that can turn back serious effects not only for Britain, but also for her trading partners, experts of Coface believe.

The agreement offered by Theresa May, in particular, assumes that Great Britain will remain the member of the European customs union and uniform trade space for all term of a transient period — until the new trade agreement is signed.

Because of concerns that Britain and the EU will not manage to agree till March 29, 2019, the transient period was prolonged till December 31, 2020. If the agreement is not reached also to this date, the joint committee consisting of representatives of Britain and the EU will be able to prolong a transient period again.

If upon termination of a transient period the EU and Britain do not approve the new mode of cooperation, the parties for an indefinite term form customs union ("uniform customs area"). This measure — some kind of safety cushion created not to allow emergence of "tough" border between Britain and Northern Ireland if the new agreement will not be signed to the determined date, economists of Coface explained. The customs agreement will work for all types of goods, except fish products, and the term of its action will be set by joint committee.

During the transient period Britain and the EU will conduct negotiations on conditions of the new permanent trade agreement. Also the draft of the agreement offered Mai assumes that for all term of a transient period Great Britain de facto will remain the member of the European Union with all that it implies the rights and obligations. As assumed in Coface, to some extent a task of the offered agreement — to postpone a deadline for determination of final terms of transaction and to save the status quo until, the agreement arranging both Britain, and the EU will not be reached yet.

Right after the text of the agreement of Britain and the EU was published, a number of supporters of a "tough" (free-lance) Brexit urged to announce to Theresa May the vote of no confidence meaning resignation. But as as of November 19 of an accurate alternative to a political policy does not have May, resignation hardly threatens it even if her opponents will collect 48 votes of the parliamentarians Tories necessary for initiation of vote concerning discharge from a position, experts consider.

Meanwhile, the Labour Party, the Scottish National Party, the Democratic Unionist Party and even 50 parliamentarians from among conservatives — Mae's batches — already promised that they will oppose the agreement. Thus, to the prime minister it is necessary not only to achieve support from a large number of members of other batches, but also to overcome split in own.

By estimates of representatives of Coface, the draft agreement failure in parliament will mean that the government led by Theresa May will have to prepare within three weeks the new draft treaty with the EU, actually such failure will be an informal vote of no confidence to Theresa May and her office.

If the parliament does not support the draft agreement offered Mai, in Britain the political crisis which can turn back unpredictable effects for the country will break out. So, for example, early elections can be initiated. Mae or parliament can start them if the majority votes for the declaration of a vote of no confidence to the government, said in the Coface overview.

If the decision on an exit of Britain from the EU without transaction — will be made on March 29, 2018 on a "tough" Brexit — national economy can seriously suffer, economists are convinced. According to their forecasts, the tough Brexit can lead to decrease in the index of entrepreneurial confidence, depreciation of pound, decrease in volumes of private consumption, growth of the sales duties, growth of the imported inflation, decrease in export volumes and interruptions in supply chains.

Especially strongly, according to Coface, automotive industry retail trade, the agro-industrial complex, the food sector and the construction industry will suffer. Waves of the British crisis can come even to Belgium Niderlandov, Ireland, Scandinavia and the countries East Europe in which the considerable share GDP is necessary on export with Britain.