When British Prime Minister Theresa May submitted her Brexit plan to the House of Commons, it was summarily shut down hard with a vote of 432-202 against—the most robust rejection in history. A day later, the government barely survived a no-confidence motion (325 votes against, 306 for). There’s another Brexit vote coming up on January 29th, and May refuses to consider the idea of a second referendum. So, what happens next? Wharton talks Brexit.
Dealing with Uncertainty
First, there’s a lot of uncertainty that Britain needs to deal with. Investors are rattled. The British pound is losing ground. And there’s worry around the world that if a deal isn’t struck, the U.K. could crash out of the EU after March 29th. This has led to many firms relocating from London to Ireland, Germany, the Netherlands, and beyond.
“If there’s a hard exit on March 29th without a withdrawal agreement, the U.K. will be in legal and economic chaos,” Brendan O’Leary, a political science professor at the University of Pennsylvania, said during the Knowledge@Wharton radio show.
Many problems come alongside this:
- Supply chain disruption.
- U.K. dependence on the French, Dutch, Belgians, and Irish, with whom most imports flow back and forth.
- Another severe drop in the value of the pound as well as another fourth quarter of net fall in investment.
That’s a lot of potential economic horror, so the U.K. parliament must make a good decision for the period ahead. The problem is that, according to Wharton finance professor Joao Gomes, “There are no longer any good solutions for the U.K.”
The U.K. After Brexit
An early Brexit would have had the benefit of offering clarity and removing uncertainty. However, now it appears that even a timely Brexit would be a bad thing.
According to a recent Guardian report, there are only a few likely scenarios, which include May holding talks about her Plan B deal and then submitting a revised agreement to the House of Commons. If it’s voted through, the U.K. leaves the EU on March 29th. But, if it’s rejected, another no-confidence vote could be called or the U.K. could ask the EU for an extension for another two years.
Erik Jones, a professor of European studies and international political economy at Johns Hopkins University School of Advanced International Studies, believes another defeat on January 29th is likely. And that could mean a no-deal Brexit, which investors hate because the damage would be considerable. Other issues the U.K. could end up dealing with after Brexit include border issues with Ireland.
To learn more about what’s going on, listen to the full Wharton podcast or read the blog here.