We are fast approaching the third anniversary of the referendum and, despite the Prime Minister invoking Article 50 and beginning the time limited two-year negotiating period that set us on the path to leave the European Union, the UK remains a full member.
Two ‘Brexit’ days have come and gone, with the Article 50 negotiating period having now been extended to Halloween; a period longer than the Prime Minister had asked for, but somewhat shorter than that expected by many political commentators at the time.
The 27 member states of the EU unanimously granted the extension to allow the UK government more time to ratify the EU Withdrawal Agreement to allow the UK to leave the European Union in an orderly fashion, and enter into the time limited ‘transition period’, during which the negotiations on the future relationship will be conducted.
However, Westminster has failed to pass Theresa May’s Withdrawal Agreement three times, with opposition parties as well as hard line eurosceptics voting against the deal. Talks between the government and the Labour Party have so far failed to reach a compromise; a permanent customs union (the preferred option of the Labour Party), should it be pursued by the Prime Minister, is likely to see the Conservative Party split in two, and alienate many Labour supporters who would blame the leadership for facilitating a ‘Tory Brexit’.
What now then for a Parliament that is as polarised as the rest of the country? Well, amongst politicians, journalists and the wider public, a second, or ‘confirmatory’, referendum seems to be an increasingly plausible proposal to help unblock the Parliamentary impasse. An alternative option – a general election – is unlikely; whilst opinion polls suggest neither of the main parties would win a majority, a general election would require Conservative MPs to vote down their own government, which is unlikely regardless of their views on Theresa May’s leadership.
Although the majority of people advocating a second ‘confirmatory’ referendum voted ‘Remain’ in 2016, weary Brexiters are starting to join the chorus of voices speaking out in favour of another plebiscite; former Telegraph journalist and ardent Brexiter Peter Oborne being one of the latest to speak out, believing it was now time for a ‘rethink’.
Whilst the most devout Brexiters claim it to be undemocratic to have a second vote, ignoring the inherent contradiction of their claims that somehow a public vote can be undemocratic, the lack of Parliamentary consent to the Prime Minister’s Withdrawal Agreement and the utter rejection of a ‘no-deal’ Brexit leave a confirmatory referendum, now the full details on Brexit are becoming clearer, as an increasing likely outcome. Recent council elections saw the Liberal Democrats and the Green Party, two parties advocating a second vote, achieve some of their best results ever, suggesting a clear appetite for this approach.
In the run-up to the European elections this month the newly formed Brexit Party is currently polling strongly and is expected to outperform both the Conservatives and the Labour Party. This perfectly illustrates the dichotomy of views in the country. A second referendum could therefore be even more inflammatory and divisive than the first, with the outcome far from certain.
Markets dislike uncertainty; its negative impact on economic growth and corporate profitability depress equity prices while incentivising investment in ‘safe-haven’ assets such as government bonds. Whilst a second ‘confirmatory’ referendum is likely to extend the period of uncertainty, markets are likely to cheer anything that could ultimately help draw a line under this three year period of instability and political crisis.
Matthew Tucker, Senior Investment Analyst