Overview

This week Boris Johnson finally secured the election he has been pushing for since he came into office.

The parallels with the 2017 election are all too clear – a newly installed Prime Minister, riding high in the polls looking to crush the opposition and seek a mandate to deliver Brexit.

But where the 2017 election saw the two main parties assert their dominance, this election will likely see their fate determined by their smaller opponents.

And unlike 2017 where the two main parties pledged to honour the 2016 referendum – this election will be a proxy vote on whether to leave the EU on 31 January or put the question back to the public.

Either way, we will not be returning to a business as usual focus on domestic issues and Brexit will continue to dominate British politics for the year ahead at least.

As such this note looks at what the various election scenarios mean for Brexit.

The way forward

Scenario one – working Conservative majority. Key features:

  • 31 January exit from the EU
  • Exit on the terms negotiated by Boris Johnson
  • Possible extension to the implementation period
  • Future relationship with the EU based on looser free trade agreement – with potential for greater regulatory divergence
  • Possible reduction in market access in both directions

A decent Conservative majority would see the swift reintroduction of the Withdrawal Agreement Bill and make a 31 January exit from the EU more likely, but even with a majority the Brexit battles will continue.

Few believe that the negotiations for the future relationship will be concluded by the end of the transition period in December 2020, and the decision on whether to pursue a one-time two-year extension needs to be made by 1 July 2020. Without an extension and if the future deal is not agreed the UK could still find itself trading with the EU on WTO terms on 1 January 2021.

Currently there is no role for Parliament on whether or not to request an extension, but if recent months provide any guide, you can expect there to be a fight to get one.

Given he is unlikely to secure a big enough majority to see off any significant rebellions, the question is whether Boris will be able to keep the ERG on side should he actively pursue (a likely necessary) extension or whether Parliament will be able to yet again tie his hands, should he not.

The number of One Nation Conservatives standing down at this election – the most likely agitators for an extension from within the Conservative party – suggest that pressure might have to come from outside the Party.

Dates aside, a comfortable election win will be a mandate for Boris’ vision of Brexit and will likely see the future relationship built on a Canada-style FTA. This would mean increased frictions for goods trade with Europe.

Scenario two – slim Conservative majority. Key features:

  • 31 January exit from the EU less likely
  • Parliamentary battle over the Withdrawal Agreement Bill (WAB)
  • Possibility of a successful Labour customs union amendment to WAB
  • Almost certain extension to the implementation period
  • Parliamentary battle between leaving the EU with a closer relationship or second referendum

Given the scale of the realignment needed to secure a large majority, a smarter bet might be on a small Conservative majority or indeed another hung Parliament.

In the aftermath of a similar result following the 2017 election David Davis acknowledged that seeking a Brexit compromise in Parliament might be necessary. Theresa May declined that opportunity, and given the hardening of positions since then – the option is unlikely to be available to Johnson should he remain PM.

In which case the unpredictable and indeterminate Brexit war of attrition will continue.

Having achieved a majority once already for his Brexit deal, the Prime Minster is likely to reintroduce the WAB. It is far from clear that it would survive passage into law unamended, with the main threats being from push for a customs union or second referendum.

How the twin threat to Labour from the Brexit Party and Lib Dems plays out will determine whether Labour throws its weight behind exiting the EU with a closer relationship or a second referendum. It is not inconceivable that an aggrieved DUP could lend its support to a Labour led push for a customs union.

In this circumstance another extension to Article 50 will likely be requested and it will be up to the EU as to whether it accepts, or piles on the pressure for a resolution from Parliament.

Longer-term, should the UK leave the EU there will almost certainly be a successful push from Parliament for an extension to the implementation period.

Scenario three – Labour-led rainbow coalition. Key features:

  • Certain Article 50 extension request
  • Second Brexit referendum before the end of the year
  • Possibility for second Scottish independence referendum
  • Likely extension of franchise to 16- and 17-year olds

It’s hard, at this point, to see a comfortable Labour majority but should they end up as the largest party they would look to govern at the head of an informal ‘rainbow alliance’ with the help of the SNP of the Lib Dems. The Brexit outcome would be the same – the UK will be heading towards another extension and a second referendum.

The Shadow Chancellor, John McDonnell, has gone on record saying that in the event of Labour falling short of a majority it would not enter into a formal coalition but look to govern with a minority of seats in Parliament.

Ian Blackford, Leader of the SNP in the House of Commons, has also ruled out a formal coalition with Labour but would be prepared to work with Labour on a ‘progressive basis’. The price of SNP support for a minority Labour government will be legislation for a second independence referendum in Scotland. The Labour-SNP-Lib Dem consensus on lowering the voting age means it would likely happen, probably making a remain result more likely in a second referendum.

Conclusion

A lot is resting on the campaigning magic of Johnson and Corbyn to deliver a stable majority and find way forward on Brexit.

The likelihood of that is slim, meaning Brexit will dominate politics in 2020 as it did 2019 and uncertainty for businesses will evolve but continue.

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