British Prime Minister Boris Johnson’s decision to suspend UK Parliament for over a month amid its struggle to negotiate for a deal barely two months before it departs the European Union sent shockwaves worldwide, prompting no-deal Brexit warning revisions, and causing divisions and contradicting predictions from puzzled strategists, economists and bank experts across the globe.
The decision, approved by Queen Elizabeth last Wednesday, propelled the Wall Street into hysteria, with top global banks issuing revised no-deal Brexit warnings, believing that the probability of UK exiting the EU without a deal is now more likely than ever.
The declaration left opposition lawmakers reeling with less than two weeks to devise new legislation to block an imminent no-deal Brexit.
Dismayed, thousands of Britons took to the streets over the weekend to protest the controversial decision. In central London alone, an estimated 10,000 demonstrators showed up on the downtown bridge and in Trafalgar Square. Carrying signs saying “Stop the Coup,” protesters said the decision threatens not only a no-deal Brexit but also their democracy.
Organized by Another Europe Is Possible and by Momentum, an anti-Brexit group affiliated with the Labor Party, the protest is expected to continue in the coming days with members expected to occupy more bridges and roads across England.
Hundreds also held protests in more than 30 other locations throughout England, Scotland, Wales, and Northern Ireland, local media reported.
In Glasgow, Labor Party leader Jeremy Corbyn led protesters in saying: “No way. It’s our Parliament.”
A public petition against the Parliament shutdown has amassed over one million signatures within its first 24 hours, while three separate court cases challenging the move are due to be heard next week.
Despite widespread criticism, Conservative Business Secretary Andrea Leadsom believes it was the right thing to do. “There will be plenty of time when the House comes back, with a new Queen’s Speech and a new parliamentary session, to be able to debate Brexit, to be able to debate the prime minister’s new withdrawal agreement, should he succeed in negotiating that with the EU,” she added.
The shutdown will be enforced from September 9 to October 14, after getting the Queen’s approval last week.
No-deal Brexit or no-confidence vote?
In separate notes to clients, J.P. Morgan and Danske Bank raised the probability of no deal both by 10% to 35% and 30%, respectively.
J.P. Morgan lead economists Malcolm Barr and Allan Monks said the suspension left MPs too little of time to pass legislation that will block the no-deal scenario. The suspension enters into force on September 9, leaving MPs with only four days before its implementation and nearly a week in late October to devise an alternative.
Admitting that they had underestimated the threats earlier made by the British leader, Danske Bank senior analysts Mikael Olai Milhoj and Lars Sparrese Merklin also revised the probability of a no-deal Brexit from 20% to 30%.
However, both financial institutions have also upped the chances of an extension. Barr and Monks raised the possibility of a general election causing an extension of Article 50 by 40% with a no-confidence vote motion against Johnson’s government. To which Milhoj and Merklin agreed, saying “our new base case is that a small majority will eventually bring the government down, form a temporary government asking for a Brexit extension and make sure there will be a general election.”
ING developed markets economist James Smith and ING chief EMEA FX strategist Petr Krpata, meanwhile, said that though the move strongly suggests that a no-deal Brexit is now drawing near, this is not the right time to act.
Johnson has repeatedly declared that Britain is prepared to and will leave the eurozone on October 31 with or without a withdrawal agreement. However, the British Prime Minister’s renewed commitment to meet with EU negotiators twice a week until the crucial October 17 summit elicits hopes among his opponents that he has softened his stance and is now leaning toward compromising in a bid to secure a deal that would be more favorable for both Britain and the soon-to-be 28-member euro bloc.
Smith and Krpata believe the negotiations remain as the government’s “plan A,” though talks for a new deal are expected to go down to the wire in late October after the Queen’s speech on October 14, where she is expected to lay down the government’s agenda in the House of Lords.
Berenberg Senior Economist Kallum Pickering echoed the same sentiment, saying on Thursday that “now is not the time to act, now is the time to observe.” He retains no-deal probability to 40%, however.
A Political Ploy Waiting to Backfire
In a separate note, Deutsche Bank strategist Jim Reid said the decision was a political move aiming to shore up some support in case of negotiations failed and resulted in a no-confidence vote. With his opponents reeling to forge a deal before the clock hits time, they will be less likely inclined to vote his government down.
Though early results showed that it had backfired.
On Tuesday, Johnson lost his majority in the House of Commons after Conservative MP Phillip Lee crossed the floor and took a seat on the Liberal Democrats’ benches, leaving the prime minister flustered and stripping him off his majority in Parliament.
Lee has long opposed Brexit and has been lobbying for a second referendum.
In a statement released after his dramatic move that rendered Johnson’s government unable to pass any legislation without the support of opposition MPs, Lee lashed out at Johnson for “using political manipulation, bullying, and lies.”
“This Conservative Government is aggressively pursuing a damaging Brexit in unprincipled ways,” he added, warning that the Brexit that Johnson is campaigning for will put “lives and livelihoods at risk” and endanger “the integrity of the United Kingdom.”
Johnson has threatened to expel MPs who will join the rebellion.
Several other Conservative MPs, however, were unfazed, declaring their opposition to Johnson’s handling of Brexit, and announcing that they will resign in protest of the prime minister’s Brexit strategy.