With Theresa May’s Brexit deal defeated for a third time in the House of Commons this afternoon, a long extension of Article 50 looks increasingly likely, according to UBS UK economist, Dean Turner, who adds that the chance of a general election is also looking more possible.
Prime minister Theresa May’s Withdrawal Agreement was rejected by a margin of 344 to 286.
This majority of 58 is in fact far more marginal than the prime minister’s previous attempts to get her deal through parliament, having surrendered majorities of 230 and 149 votes on the two occasions previously.
Today, March 29, was meant to be “Brexit Day”, marking two years since the UK triggered Article 50.
“The third defeat of the Withdrawal Agreement crystallises the UK’s departure date as 12th April,” says Turner.
“Before then, we expect MPs to converge on the view that more time will be needed in order to determine the path for Brexit.
“Therefore, a long extension to Article 50 looks increasingly likely, boosting the chances of a general election.”
Impact of Article 50 extension
UBS had projected prior to the vote that a long delay to Article 50 would see business investment remain week, and sterling at $1.33.
In contrast, had the deal been approved, UBS’ view was a rise in business investment and sterling reaching $1.37.
The pound has suffered as a result of the ongoing Brexit uncertainty, though experts have noted that the market appears confident that some sort of deal with prevail, preventing a further slide.
“Sterling hasn’t responded favourably to today’s result, likely interpreting an increased risk of a no-deal scenario two weeks hence,” Turner continues.
“That said, our view remains that MPs will ultimately avoid this outcome.”