MPs vote down May’s Brexit deal – what happens next?

Theresa May’s European Union withdrawal agreement has not made it through the House of Commons – with 118 Conservative Party rebels voting against the proposal, along with the 10 Democratic Unionist Party MPs. In total, the deal was rejected by a record margin of 230 votes. Granting the wishes of backbench Brexiteers to split with the EU while maintaining the delicate and unique political situation in Ireland was always going to be a tough ask. Predictably, the month-long delay in calling the vote has not worked in the prime minister’s favour, leaving the country in suspended animation, and the property industry glaring at the government from across the table, demanding that something – anything – be sorted out so that some version of stability and normality can return. So, with the deal rejected by parliament, we run the rule over some of the options now facing the Conservative government with regard to the UK’s divorce from the EU, and how each of them might affect the industry. 1. Cancel Brexit The European Court of Justice ruled last month that the UK can cancel the entire Brexit process without having to get consent from the other 27 member states and altering the terms of its membership. Whether this is even something being contemplated by those in power, however, is another matter – with leading politicians having reacted to this news by once again citing the referendum vote of June 2016 as being the mandate to push ahead with the process, and leave the EU without a deal, if necessary. Given that the property industry likes certainty and assurance, this would theoretically be one of the most favourable options, with the trading relationship with our biggest partner maintained – as well as unfettered access to global talent. However, such a reversal (without actually undertaking another referendum) would be unlikely to put the conversation to bed once and for all – and so the pursuit of genuine certainty over the UK’s future is unlikely to be resolved by a simple governmental cancellation of the process. 2. Hold a General Election This is the Labour Party’s preferred choice for what happens next. Last month, the party claimed it was in a position to form a minority government if necessary. That position has been reinforced, with Jeremy Corbyn calling for an election as a “priority” last week. The most recent polling data from YouGov has Labour at 34% and the Conservatives at 40%, which will have bred confidence among the Labour ranks that they can force a bump similar to the surge after the 2017 election was called, during which time they whittled down a 21-point lead in the polls. The Tories are – at present – somewhat bound by Theresa May’s Lancaster House speech in early 2017 and the election manifesto published in the same year, both of which emphatically ruled out a softer-style Brexit that would help engender a higher level of continuity and surety for business operations in the UK. Whether a different Conservative leader would be able to row back from that and pursue a different type of Brexit is unclear – and they would potentially run into the same issues that Mrs May has faced in trying to juggle the unique circumstances in Ireland with the volume of Eurosceptic backbenchers. Labour are likely to pursue a softer Brexit (if elected), given that their “six tests” include needing to “deliver the exact same benefits as members of the Single Market and Customs Union”. This is likely to be something that the property industry would be receptive to, given that the flow of global talent (as well as materials, products and services) across borders is key to a number of sectors, especially construction and financial services. However, the wider policies of a Labour government – particularly around taxation – remain fairly unpalatable for the industry. When the election was called in 2017, our readers seemed to strongly favour a retention of the incumbent Conservative government, despite the fact that overwhelming divisions within the Tory ranks meant a softer Brexit was never likely. 3. Leave with “no deal” This would mean that the previously agreed “implementation period” running up to December 2020 was no longer applicable, and the UK, while free to strike trade deals with any nation or trading bloc, would fall back on the World Trade Organization (WTO) default trading rules and parameters. Undoubtedly, this would cause the most disruption to UK real estate. Without any kind of deal, there is no longer a transition phase to get used to whatever new realities await international business operations post-Brexit. There would be an immediate and severe barrier to access global talent, as well as a lot of regulatory processes to become accustomed to, and the lengthy process of renegotiating those trade agreements. Financial take-up in London has suffered slightly as a result of the referendum, with the sector comprising 13% of overall activity in the London office occupational market since July 2016, in comparison with 19% in the period before the result. There has been some reticence in anticipation of Brexit already, with the hope that a resolution could be found to minimise disruption. A hard Brexit would shatter that hope, and although there could be some opportunity within that disruption (notably with the likelihood of further currency-based discounting immediately afterwards), it’s likely that the majority of decisions on location and investment would have to be deferred until a clearer picture emerges of how the UK reacts to crashing out. 4. Call a second referendum (the “People’s Vote”) The position held by a large number of MPs is that, with the stark realities of Brexit thrown into sharper focus over the past two years, the people now deserve to vote on whether they genuinely want to leave the EU. However, as with the “Cancel Brexit” scenario, the mandate from June 2016 is still being touted as indefatigable proof that the nation wishes to leave the EU, and any attempt to call a mulligan on that result is tantamount to risking future trust in democracy. Ultimately, it’s impossible to know what type of result would put this issue to bed once and for all if a second vote were to occur. The real estate industry wants clarity, and wants it as soon as possible. Perhaps a 70:30 victory either way would settle where we go from here – and allow everyone to progress their plans accordingly – but in reality this scenario may simply be another delay to arriving at a destination that we are already on the path towards. Theresa May now has three days to come back to parliament with a new plan, with time fast running out to obtain parliamentary sign-off in time to keep the divorce date of 29 March 2019. Noises coming from EU leaders suggest that the current deal is all that the UK can vote on at this time, and so there cannot be any fundamental changes to the negotiated withdrawal proposal if that date is to be adhered to. There’s a strange juxtaposition in the property industry’s wishes for the future political climate, insofar as the preference would seem to be for a Conservative government but a Labour-style softer Brexit. As mentioned above, the Lancaster House speech and the 2017 manifesto appear to bind Theresa May against any kind of soft Brexit, but, ironically, that might be the only one that would currently get through the House of Commons. It would involve renegotiating the withdrawal position with the EU, as well as reaching across the political divide to obtain support from Labour, SNP and Liberal Democrat MPs to offset further Conservative Party scepticism. Ultimately, this is now becoming the most disorderly of Brexit scenarios anyone could have realistically imagined before the referendum was held. Main image © Joel Goodman/Lnp/Rex/Shutterstock To send feedback, e-mail graham.shone@egi.co.uk or tweet @GShoneEG or @estatesgazette