Story and strategy about the vote on the Brexit bill in the British Parliament!
◎ Brexit Schedule
January 16
・4:00 AM (Japan Time)：First reading of the withdrawal bill in Parliament begins
・4:00 AM–Just after 7:00 AM：Results announced
・Approved → take the withdrawal bill to final agreement with the EU
※If rejected, proceed to the following
・March 29: Withdrawal from the EU
・March 30: Start of transition period
・March 29, 2021: Brexit completed
◎ What could happen if the vote result is a rejection
1) May administration submits an alternative within 3 days
2) Opposition Labour Party motion of no confidence
3) Prime Minister May resigns
4) No-deal Brexit
5) Second referendum
6) Renegotiation with the EU
7) Brexit postponement
8) Brexit revocation
1) May administration submits an alternative within 3 days
If the withdrawal bill is rejected, normally an alternative must be submitted within 21 days. However, due to time constraints, a bill demanding an alternative within 3 days was approved on the 9th. Therefore, an alternative must be submitted by the 18th. If an alternative is submitted, the process will move to debate again and a vote again.
2) Opposition Labour Party motion of no confidence
Labour leader Corbyn has said he will immediately submit a no-confidence motion if the withdrawal bill is rejected. If the motion passes, a general election would follow. In a general election, no party is expected to win an outright majority. The next prime minister is also anticipated to be divided in opinion.
3) Prime Minister May resigns
If the election results in a defeat on votes, the prime minister (the cabinet) may be held responsible. A large margin of votes could raise the likelihood of resignation. Many prime ministers resign in such situations, but…
Prime Minister May has, on several occasions related to Brexit, not resigned and carried on. This time as well, it seems unlikely she will resign.
4) No-deal Brexit
May has said there is no Plan B for the withdrawal bill. If it is rejected, a no-deal Brexit could occur. However, the UK foreign secretary and EU sides have stated they will strive to avoid no-deal. A no-deal Brexit would be problematic not just for the UK but for the EU as well, so there is an effort to avoid it. Thus, there have been permissive statements regarding negotiations on withdrawal as follows.
5) Second referendum
With a high likelihood of rejection in the current vote, calls for a second referendum are growing. There seem to be several types of second referendums. Here are two with higher probability:
First: a binary referendum asking whether the UK should leave the EU or not
Second: a three-option referendum asking whether the UK should leave, leave without a deal, or leave through orderly exit
There is also a possibility of a binary referendum on no-deal or orderly exit.
6) Renegotiation with the EU
If the withdrawal bill is rejected, the UK and the EU may again negotiate withdrawal terms. The EU previously stated there would be no renegotiation as of late November last year, but recently there have been comments suggesting the possibility. For the EU, if the UK leaves without a deal, its budget contributions would disappear, causing gaps. The EU budget includes UK contributions, so the EU would face a shortfall. UK contributions are large within the EU, so filling gaps is not easy.
Therefore, the aim is likely to avoid no-deal Brexit.
7) Brexit postponement
If renegotiation occurs, March 29 may be too tight a schedule. Therefore, there have been statements that a postponement of the Brexit date could be arranged, possibly for 3 months or until July. This year is an election year in the EU as well, with the European Parliament elections scheduled for June. Given this election, the original plan was to have left before March 29.
From these remarks, it seems avoiding no-deal Brexit is the priority, balancing with the European Parliament elections and choosing to avoid no-deal Brexit.
8) Revocation of Brexit
The European Court of Justice ruling states that Article 50 of the Lisbon Treaty (the legal basis for withdrawal) can be unilaterally revoked by the UK. So technically the UK has not yet left the EU. If the UK wishes, these two years could be erased. The rest depends on the UK’s choice, but given public opinion, it seems unlikely. If revocation occurs, it would likely be a second referendum indicating the UK should not leave and to remain.
◎ Post-vote storyline and strategy
1) Pound buying strategy
Renegotiation with the EU,Brexit postponement,Second referendum— if any of these occur, consider buying pounds.
In cases of renegotiation with the EU or Brexit postponement, the content of the renegotiation matters, so it’s not a blanket buy. In the short to medium term, buying is considered.
In the case of a second referendum, buying pounds outright is considered, with a long-term view. If a second referendum yields continued support for remaining, that is a consideration, but there is also a risk of Brexit being chosen again, so that aspect should be watched.
2) Pound selling strategy
No-deal Brexit andMay resigns— consider selling pounds. In the event of a no-deal Brexit, a long-term selling strategy is considered.
However,If Prime Minister May resigns, it could cause political instability— if a successor is quickly found and a smooth transition occurs, the stance may change. If the next prime minister holds anti-Brexit views, the strategy could switch to buying. For now, the probability of that is low. If May resigns, political turmoil in the UK could be prolonged, and opposition leader Corbyn is not particularly popular, so it may be expected that May’s resignation would lead to extended political chaos.
3) Monitor
If an alternative is submitted orA no-confidence motion is submitted— wait and see. I cannot decide without knowing what the alternative contains.
Also, with a no-confidence motion there is a possibility it could be rejected.
Note: This strategy has limited positions due to many uncertainties. It may be prudent to add positions later as needed. More important is to manage risk and avoid losses from sudden moves or shakeouts.
※ Some information cited from below sites: thank you for the UK/EU information.
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