As expected PM May lost again the vote on the “slightly revised” Brexit deal. The votes “against” exceeded those in favor by 149, which is lower than her defeat in January (230). Yet, it is a sizable defeat which questions her capacity to get the deal through. Around 75 Tories still voted against (down from 118 in January) while the 10 DUP MPs from her coalition rejected it again. Two other votes will follow on Wednesday and Thursday which in our view will end up with an extension of Article 50 beyond 29 March. The request will be debated and approved (unanimity needed) at the EU Summit on 21-22 March. Some conditionality might be required from the EU side. We have long argued that an extension period would open three relevant options: (i) a renegotiated Brexit deal; (ii) a second referendum; (iii) a renegotiated Brexit deal toward a permanent customs union (a softer Brexit). We think MPs are trying to force the third option, i.e. a softer Brexit through cross-party consensus. This situation keeps uncertainty high (“no deal” probability unchanged at 25%) and weighs on GDP growth (+1.2% in 2019).
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Weekly Export Risk Outlook 13 March 2019