April 12 deadline looms for hard Brexit
Members of the U.K. Parliament on Wednesday evening voted down eight options proposed by lawmakers that would allow the U.K. should to leave the European Union.
Members of Parliament narrowly rejected a U.K.-wide customs union with the EU as well as an option to hold another referendum 264-272 and 268-295, respectively.
They also rejected scenarios in which the U.K. would exit without any deal, a new Norway-style trading arrangement with the EU and a possibility for the U.K. to rejoin the European Free Trade Association.
Parliament took control of the Brexit process Monday after the Brexit process was extended until April 12 by EU leaders at Prime Minister's Theresa May request last week.
Also Wednesday night, Ms. May said she won't be leading the second phase of the negotiation and will step down as Prime Minister when her deal is delivered. However, after gaining support from her own Conservative Party, she did not manage to secure support form the Democratic Unionist Party that would allow her to form a majority and approve her withdrawal agreement.
"We can't agree to something that would damage the union," DUP leader Arlene Foster said. "We warned (Ms. May) before she signed that withdrawal agreement. "We warned about the dangers of the (Irish) backstop."
The U.K. is set to leave the European Union and its single market on April 12, which means it will be very difficult to maintain an agreement on Irish backstop, that seeks to avoid the creation of a hard border between Ireland and Northern Ireland, should the U.K. leave the European Union in a hard Brexit.
John Bercow, speaker of the U.K. House of Commons, said Monday he will allow a third meaningful vote on Ms. May's deal when she gains sufficient support.
The next debate is expected to take place April 1.
The pound sterling fell 0.56% vs. the dollar in early afternoon trading Thursday to $1.31, while the FTSE All-Share index rose 0.66%.
"Uncertainty continues to weigh heavily on the U.K. economy, and as we hurtle toward the cliff edge, all options are still possible." said Chris Rodgers, senior fund manager at Sanlam Investments, in an emailed comment in reaction to the result of Parliament's votes Wednesday night.
"For foreign investors, the lack of clarity and direction remains off-putting, but the fundamentals of the U.K. do remain strong and domestically focused U.K. equities still offer real value," Mr. Rodgers said.
"The impasse in the U.K. Parliament and the April 12 deadline do not give much room for maneuver to the U.K. government," said Ludovic Colin, head of flexible bonds at Vontobel Asset Management, in a separate emailed comment.
Reaching Brexit is still possible, he said. "However, it will be a last-minute decision by the British Parliament under enormous pressure from the public and possibly accompanied by tension in the financial markets."
The pound sterling, and U.K. credit and equity markets would suffer most and for an extended time under a hard Brexit, Mr. Colin said. The economic impact could mean eurozone assets would outperform U.K. assets but underperform global assets.