The fly in the ointment? How Brexit may be delayed by no deal
For the last year or so, one of my favourite betting markets has been the market on Betfair on whether Britain will leave the EU by 11pm on 29 March 2019. I wrote about it in February and it has been a market that I have returned to regularly over the intervening months. The price on Yes, Britain will officially leave by that date has shortened considerably since February and as I write last traded at 1.83.
I still think that is much too long for all the reasons I gave in my February article and still regard it as a buy. If a deal is done in principle in October or even December, there’s no obvious reason to extend the time period for a few weeks; all concerned can be expected to get their finger out to get it appropriately ratified in time for the deadline. If negotiations are stalled, a few extra weeks aren’t going to break the logjam. So there’s no obvious incentive to delay the effective time of Brexit either way.
I have, however, noticed a route by which the bet might fail which I hadn’t previously considered. So in the interests of full disclosure, I draw it to your attention. Personally, I’m not convinced it’s particularly likely. But if like me you’re heavily invested in this market, you might want to chew it over.
On Friday the Cabinet sought to reach a common position on outstanding aspects of its negotiation. Huge amounts of nervous energy and analysis were expended on this, right down to the taxi arrangements for recalcitrant ministers.
I find it hard to muster much enthusiasm for the subject, given that the EU looks set to reject whatever position the government might have alighted on in the interests of party unity. From this point, it looks likely that Britain is going to end up either with essentially whatever deal the EU eventually decide to offer it or with no deal at all.
Either route looks fraught from here. I don’t propose to look at the practical aspects of a deal on this occasion; if a deal is to be done then the route to 29 March 2019 becomes a mechanical exercise.
What if no deal is done? Then Britain looks set to crash out of the EU. This would potentially be humongously inconvenient in the short term at even the most basic of levels. It wouldn’t quite be at the level of the breaking of the sixth seal in the Book of Revelations, which will trigger a great earthquake and the sun will become black as sackcloth of hair and the moon will become as blood, but unless a fair amount of practical action was taken beforehand we could expect to see planes grounded, nuclear power plants shut and large parts of the law would be thrown into complete disarray as EU laws ceased to apply.
When you hear such predictions, your antennae should twitch.In that last paragraph there were two key bits: the word “potentially” and the words “unless a fair amount of practical action was taken beforehand”. You could expect a fair amount of practical action to be taken. Even if there is the most almighty falling out and no deal is done, it is in no one’s interests to cause chaos. So there will be a substantial effort to avoid the worst of the consequences.
There is, however, a substantial risk that if no deal is done, that is only apparent at a very late stage. Presumably everyone will keep working towards doing a deal until there is a final late showdown. If so, there may not be the time to make that substantial effort.
And this is the one set of circumstances where a short delay to Brexit might be in everyone’s interests. There wouldn’t be a logjam that needed breaking, just a bit of time to make sure that the sticking plaster was in place and the sealing wax had dried. It appears that the EU has been giving this some thought, as the Austrian Chancellor recently suggested. Ironically, the single most likely circumstance in which Brexit might be delayed is if no deal is done at all.
I have to say that I am now expecting a deal. Theresa May is evidently working towards one. The harder line Leavers in the Cabinet appear to have no stuffing in them for a fight. The consequences of no deal are causing everyone who has thought about it in any detail to flutter their eyelids and have palpitations.
The government is so dysfunctional, however, that a deal cannot be guaranteed. It seems that there is no majority in Parliament for any one deal, or for no deal at all. How this pans out is far from clear. I still think backing Brexit to take place by the current appointed date and time is a very good bet, but there are ways in which it could lose. This is one of them.