The UK’s impending departure from the EU was thrown into further confusion and uncertainty Tuesday when Prime Minister Theresa May’s proposed Brexit agreement was rejected by Parliament.
Shortly after the government’s defeat by a 432–202 margin, May invited a no-confidence vote in her government, which opposition leader Jeremy Corbyn then promptly tabled. That motion is expected to be debated Wednesday.
The result of the vote deepens the UK’s Brexit turmoil. It increases the risk of a “no deal” exit from the EU but could also lead to a strategic rethink by the government and even potentially a reversal of the 2016 Brexit decision.
In a statement shortly after the vote, May said, “I have always believed that the best way forward is to leave in an orderly way with a good deal and have devoted much of the last two years negotiating such a deal.”
An extension to the UK’s negotiation period now seems more likely, though a “hard” Brexit on 29 March is also a significant possibility.
“The risk of a disorderly exit has increased with this vote, and while we do not want this to happen, we will be prepared for it,” said a spokesman for European Council President Donald Tusk.
Anxiety from Brussels was conveyed by European Commission President Jean-Claude Juncker, who tweeted: “I urge the United Kingdom to clarify its intentions as soon as possible. Time is almost up.”
In the short term, a no-deal Brexit could disrupt supply chains, push costs up, and tank the pound sterling.
“Were we to leave under such circumstances, we could expect a raft of rapid post-event negotiations with the EU since there is a clear mutual interest in our trading relationship,” said David Newton, FCMA, CGMA, finance director of currency brokerage Halo Financial. “It is important to remember that nations have been trading with each other all over the world for hundreds of years. Brexit isn’t going to stop that, whatever the outcome. Ultimately, if there’s a mutual interest in a trading relationship, then it will happen in some form.”
This is a breaking news story. Please check back later for updates.
For more FM coverage of Brexit and the way forward, please see our additional coverage:
- “UK Companies Take Steps to Mitigate Brexit Risk”
- “Planning for Brexit Uncertainty” podcast
- “Clear Brexit Strategy May Offer a Recruitment Edge”
- “Revolutionary thinking: Why CFOs Should Account for Political Instability”
— Andrew MacDowall is a freelance writer based in France. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.