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An Uncertain Breakthrough


Jack Simpson looks ahead to the Third Vote on the European Union Withdrawal Agreement, and the growing impact of economic uncertainty.

This Thursday, Government will once again be voting on the Withdrawal Agreement. This is the treaty that allows the UK to leave the European Union in an orderly and not too disruptive manner. It allows a two-year transition period, secures citizen rights and addresses the Irish and Gibraltar borders with the EU. However, uncertainty persists as the Agreement has stalled and does not specify a future relationship, only the divorce.

The Third Vote

This is the third time that this vote will take place. Having already been delayed from December, the Government suffered the worst modern Parliamentary defeat of 202-432. May is bound by law to hold this vote, so two weeks later, she was forced to bring a "new plan" (the words were changed slightly), and a compromise was found in the second vote.

A lot of opposition to the Agreement stems from the Irish Backstop (explored here). The Backstop poses a potential problem of being locked inside the EU Customs Union, but outside the EU’s political body’s, a trading purgatory in which the UK is a rule taker.

The fudge was an amendment, a change to the bill, that said ‘Parliament will back this bill if alternative arrangements to the Backstop are found’. This change was passed, which meant voting on the overall Agreement became unnecessary. May has since been on a tour of EU capitals, though the EU remain sceptical of any changes to the Agreement.

What’re the “alternative arrangements”? Not clear. What’s changed? Not much. While the EU has committed to further talks, the only thing that is changing is the time. We are now under 50 days away from Brexit day, and the threat of No Deal is ever growing. This has led to a highly uncertain atmosphere, in which business are struggling to plan for the weeks ahead, and its economic impact is beginning to be felt.

Economic Slowdown

ONS figures today revealed that GDP growth is estimated to have slowed to 1.4% from 2017 to 2018, the worst since 2009, and has resulted in the decrease of business investment for the fourth quarter running, also worth 1.4%.

Our Quarterly Economic Survey suggested that Brexit uncertainty is becoming the top concern amongst regional business, with planned recruitment, investment and international sales stalling. A point reinforced by Deloitte, whose recent survey found 58% of respondents rated the economic uncertainty as high or very high.

This stalling was also reflected in the 2018 Q3 trading figures, that witnessed a decline on both the quarter and the year, with a 9% quarterly decline in EU trade. Many factors could explain this, though Brexit risk seems logical. As our future relationship becomes less clear, UK-EU contracts become less favourable, currency rates become more volatile and stockpiling a stronger strategy.

As a side, pressure is beginning to grow on the continent to find a way forward in the Brexit process, especially with the threat of No Deal looming. A recent paper found some 600,000 jobs could be at risk outside the UK under a Hard Brexit, 200,000 of those being inside the EU.

To arrest this slump, it is key that Government finds both a way to break this impasse, and secures a deal that does not adversely affect the trading relationship with the region’s biggest global market, the European Union. Only with this properly defined vision, will confidence in international trade be restored.


It is almost politically uncertain as it is economically uncertain, as to whether there will finally be a breakthrough this week. There have been letters and comments going across the parties, compromises titled as if they were Cold War novels being suggested (Malthouse Compromise), and positing from all sort of politicians over what is and isn't acceptable for their version of Brexit. Anyone calling a prediction is a braver soul than me.

If a breakthrough is reached this week, it is still uncertain where we will be heading, as the Agreement only settles our departure. Therefore, Government must act fast to outline its proposal for the future relationship, and where it believes there will be continuity, and where there will need to be negotiation. This mapping will allow business to more actively prepare for the most vulnerable aspects of their business.

However, time is clearly running out so Article 50 must be extended. Even if the agreement is found, so much legislation and implementation will be needed to ensure an orderly departure, by ignoring this fact, the Government is heading towards a political and economical crisis. While this piece has focused on uncertainty, members believe it is better to prolong a period of harm, with the goal of getting the best deal possible, than suffer the self-destruction of a No Deal or Hard Brexit.

With estimates ranging from a 5-16% decline in GDP, members have been clear that a No Deal Brexit must be avoided at all costs, and that any future deal should be judged by the relationship we currently have with the EU. An extension would afford Government the opportunity to take a step back, and work with business, and the region, to secure a deal that works for the economy.