May has admitted she could delay Article 50. What comes next?

May’s stalling tactic hasn’t worked

In the two months since British Prime Minister Theresa May decided to postpone a Parliamentary vote on her deal with the EU, I have been predicting she would be forced to delay implementation of Article 50 withdrawal. And yesterday, she finally admitted as much, giving parliament the opportunity to vote for a no-deal outcome as well as her deal or delay.

The hardline ERG are softening their position regarding her deal. But it’s clear there still aren’t enough votes to get it past parliament. And the no-deal outcome frightens too many MPs. So that’s a non-starter too. In the end, May will probably have to delay Brexit – that’s if MPs actually vote in favor of delay. They could reject all three – May’s deal, delay and a no-deal outcome.

What then?

Who knows. What’s clear is that Theresa May is out of her depth. She never should have invoked Article 50 to begin with, until she had an inkling of where this process was headed. Instead she decided to allow the clock to tick down, putting her on the back heel right from the start. Labour leader Corbyn would have been potentially worse since he had wanted to trigger Article 50 straight away. You can’t negotiate under those circumstances because you have no alternative to a negotiated agreement. And the other side knows it.

Only the spectre of a hard Brexit gives May any leverage. And only belatedly did she use that leverage. But, that was after it was clear that parliament didn’t want a no-deal outcome. So, it was an empty threat – as we are about to find out. Stalling to make a no-deal outcome more likely doesn’t change the emptiness of the threat. And, ultimately, it fractured her party in the end. Very poor leadership indeed.

Revocation or crashing out

I’m not running any victory laps about having judged correctly that May would be forced to offer an extension. First of all, it’s not a done deal. Nigel Farage claims that if “the government and parliament are stupid enough to request a very short extension of article 50 which is vetoed at the EU Summit on March 21…, time would have run out, there would be no other alternative” but a no-deal Brexit. So, there’s that. But, there’s also the fact that, while I believe the majority exists in parliament for an extension, parliament hasn’t voted yet. Something could change. But, most importantly, a short extension actually increases the potential for Britain to crash out. Here’s how.

The EU is holding parliamentary elections in late May. It’s unclear whether the UK will be involved. If it is, likely we would see a whole slew of eurosceptic MPs from the UK mucking about in EU parliamentary procedure. The Europeans don’t want that. But, if Britain is not involved in the elections, the UK government has to send a slate of MPs to the European parliament anyway because, as long as the UK is a member of the EU, it must be represented. Any vote that doesn’t include British MPs could be deemed illegal subsequently.

So you have a big problem as far as the Europeans are concerned. And they don’t want to re-up Britain’s article 50 delay again and again because it’s very disruptive. They want the Brits to decide in or out and get on with it. So, it’s one delay and out or one delay and remain in. That’s how Britain crashes out.

Let’s also remember that a delay is incredibly damaging in the near term to companies that have been preparing for a March 29 departure. Suddenly, they have to put their plans on hold and recalibrate. They face a double cliff-edge instead of a single one. How many times are they going to do that before they give up on incremental investments due to the uncertainty? Not many.

The result: if the UK delays until June 30, likely it will not get another shot. It must either accept Theresa May’s defective deal, crash out or revoke article 50 altogether. I have said from the start that I see revocation as the likely outcome if push came to shove. But, that’s just an educated guess. The UK could exit with no deal too.

Closing thoughts

I don’t think Theresa May can get any meaningful movement from the EU on the Irish backstop. And so her deal will remain defective as a result. It will be voted down by parliament. Then, MPs will have to decide whether to rally around a no-deal Brexit or extending article 50. I believe they will extend article 50.

But, the EU has no incentive to vote to extend unless it’s in the vein that ratification of May’s deal by parliament is imminent or could be made possible. If May comes back to the EU and says “I can’t get the votes, so please extend”, the EU could simply say no. And then, parliament would be faced with deciding whether to revoke article 50 or leave by March 29th.

At the same time, if the extension is longer, it gives Theresa May more time to work on the defectiveness of the deal or be replaced by someone more effective as Prime Minister. From an EU perspective, this is sub-optimal given the uncertainty that would continue. But, since the EU wants Britain to remain, they might insist on a longer delay, because a longer delay makes a second referendum more likely.

Theresa May, on the other hand, wants to make article 50 revocation impossible by running down the clock so far that only a no-deal option or her (modified) deal are the only real options. She has been forced to extend. But, she has opted for a short extension because a long extension makes revocation more likely.

And the saga continues, seemingly without end.