Home / UK / The UK has asked the EU for a delay to Brexit, what comes next? – CNBC

The UK has asked the EU for a delay to Brexit, what comes next? – CNBC

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British Prime Minster Theresa May and President of European Commission Jean-Claude Juncker attend a press conference at the European Commission on March 11, 2019 in Strasbourg, France.

As widely expected amid ongoing Brexit confusion and uncertainty, the U.K. has delivered a letter to the European Union asking for a short extension to its departure from the bloc.

The EU has already flagged that the U.K. would have to have a good excuse for asking for a delay to its departure, that was due March 29, and that it will not renegotiate the Brexit deal.

Here’s a quick guide to what could happen next:

What just happened?

The U.K. has asked the EU for more time before it leaves the EU – which it was supposed to do on March 29. In a letter to European Council President Donald Tusk, May sought a delay to Brexit until June 30 and said a longer delay was not in anyone’s interests.

Why did it ask for a delay?

A delay has been requested because the British parliament has rejected U.K. Prime Minister Theresa May’s twice – once in January and again earlier in March. The biggest problem the U.K. has over Brexit is that there is no consensus in Parliament (or indeed, among the public which remains divided over the referendum) over what the future relationship with the EU should look like.

As such, the Brexit deal failed to find support among Leavers and Remainers in Parliament alike. Brexiteers, or those who voted to leave the EU, dislike the Irish “backstop” part of the deal. The backstop plan is essentially a legally-binding insurance policy to ensure there is no hard border between Northern Ireland and the Republic of Ireland.

This would keep the U.K. in a customs union with the EU if both sides fail to strike a trade deal in a post-Brexit transition period (one that only exists if there is a deal).

The EU tried to reassure the U.K. that this was only a last-resort but that failed to placate Brexiteers in Parliament, and the Northern Ireland’s Democratic Unionist Party (DUP), which props up Theresa May’s government.

What happens now?

The letter to Brussels comes ahead of a crucial EU summit on Thursday where the bloc’s 27 leaders are expected to discuss the U.K.’s request. They all need to agree for an extension to be granted. Several EU leaders on Wednesday expressed their willingness to support an extension.

There is palpable frustration in Europe at Britain’s lack of clarity over Brexit, however. European Commission President Jean-Claude Juncker said Wednesday morning that it is “highly probable” that Britain will not leave the EU on March 29 and showed his frustration at the proceedings.

Speaking to Deutschlandfunk radio, he said, “When it comes to Brexit we’re in God’s hands. But even God has a limit to his patience.” He reiterated that the EU won’t renegotiate the Brexit deal.

In her letter to the EU Wednesday, U.K. Prime Minister Theresa May said she intended to bring her Brexit deal back to Parliament next week despite the Speaker of the House John Bercow, ruling Tuesday that the deal would have to be substantially changed in order for her to be able to put it to MPs for a third time. The government could now look for ways around that decision. It hopes that Brexiteers will be encouraged to vote for the deal this time if faced with a potentially long delay.

Frustration and disbelief at the uncertainty surrounding Brexit is not confined to the EU alone. Those closely following the latest twist in the long-running Brexit drama say it has reached tragic proportions.

“Even Shakespeare could not have imagined a bigger drama,” Holger Schmieding, chief economist at Berenberg Bank said in a note Wednesday, adding that U.K. Brexiteers had once set out to “regain control” but had instead given the EU more leverage to control what happens next.

Will the EU agree to a delay?

The EU’s chief Brexit negotiator Michel Barnier said Tuesday that Europe must protect itself when considering a Brexit extension. At the forefront of the EU’s concerns is preventing any disruption to European parliamentary elections between May 23-26.

Berenberg’s Schmieding said that the EU27 being “exasperated” with the U.K.’s dithering on Brexit was “understatement of the year.” Still, the EU wants to avoid a “hard” Brexit (where no trade relationship with Britain is in place) and doesn’t want to be blamed for causing a “no-deal” Brexit.

That means that the EU could either endorse the U.K.’s request for a delay in principle on Thursday, or that EU could ask the U.K. to specify by 28 or 29 March “whether it wants to use the delay simply to finalize and ratify one of the three easy Brexit options, namely May’s deal, an augmented customs union or full single market membership,” Schmieding said.

“The EU could then call a special summit at short notice to formally grant the Brexit delay request,” he note.

If the U.K. said that it wanted a customs union or full single market membership this would require only limited changes, if any, to the Brexit deal (or ‘Withdrawal Agreement’, as it’s officially known). But if the U.K. cannot endorse one of the three options on the table by 28 March, the delay would have to be much longer, Schmieding noted.

A thing for the EU to keep in mind is its trade ties with the U.K. and potential economic damage from not allowing an extension. In 2017, the U.K. had a trade deficit with the EU as a whole of £67 billion, with some EU member states standing to lose much more than others from any sudden “no-deal” Brexit and trade tariffs.

For one, Germany could certainly try to influence any reluctant member states to allow for an extension, given its strong trade ties with the U.K. – in 2017, Germany had just over a £21 billion trade surplus with the U.K, parliamentary data shows. Christoph Schmidt. president or the RWI (the Leibniz Institute for Economic Research) told CNBC Wednesday that all sides were aware of the economic damage a “no-deal” scenario could cause.

“I think we are all aware of the uncertainty that is created by this protracted process, I think everybody knows that a no-deal Brexit or disordered Brexit would create a lot of economic harm to the U.K. itself but also to its economic partners in the rest of the EU so i think it’s understandable that one wants to solve a deal or to agree on a deal,” he told CNBC’s Squawk Box Europe.

How long could a delay be?

Although the delay requested is for three months, it could be extended, potentially (and particularly) if the U.K. again fails to agree on the next course of action. A delay of nine months to two years has even been mooted as possibilities.

On a technical note, the U.K. is legislated to leave the EU on March 29 whatever happens so to avoid this the U.K. would have to legislate to prevent a “no-deal” departure on March 29.

If a short delay is not enough to break the deadlock over Brexit in the U.K., the country would likely have to take part in the EU parliamentary elections – but could be blocked from taking part in EU decision-making in the meantime.

If the delay is longer, it’s likely that the U.K. Parliament would have to vote on that and already Brexiteers are threatening to vote against a longer delay. Former Conservative Party leader Iain Duncan-Smith said Wednesday that many MPs would vote against a longer delay and that the only way a delay would work is if the deal was changed.

“Any delay creates a bow wave of problems, not just for the government here but for the governing party around the country,” Duncan Smith, now a backbencher in May’s party, told BBC Radio.

“There is only one reason that would pass muster, and that would be because the agreement has to be changed… Any delay must be hinged around the idea of getting change to the deal, but any other reason simply doesn’t work.”

The UK has asked the EU for a delay to Brexit, what comes next? – CNBC

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