UK Prime Minister, Theresa May must now return to Brussels on a wing and a prayer to renegotiate the Irish backstop. Currency markets reacted negatively as this is currently seen as an impossible task. The EU aren’t seemingly willing to re-open the Withdrawal Agreement and the so called UK ‘Malthouse Compromise’ for a facilitated customs union and technological solutions to avoid a hard border in the island of Ireland would continue to just be a rerun of previous unsuccessful negotiations.
While a no deal scenario is still unlikely, these developments increase the risk of accidentally leaving the EU without a deal and plans may intensify from both sides to manage that outcome.
The successful Brady/May amendment did however provide much requested clarity to the EU that there is a majority in the UK Parliament for the Withdrawal Agreement if there is an agreed alternative arrangement to the Irish backstop.
This leaves the ball in the EU court to choreograph a revised deal that would guarantee support in the House of Commons. If however, “nothing has changed” in two weeks and there is a failure to have a revised deal ratified by February 13 then MPs will have another opportunity, on February 14, to vote to gain control of the Brexit process. An extension of Article 50, to allow time to pass legislation, also now seems increasingly likely.”
Bethany Payne, Portfoliomanagerin Global Bonds, Janus Henderson Investors