It was a long night in the House of Commons as MPs voted on seven different proposed amendments to the Brexit deal, which failed to pass through parliament earlier this month. As the votes were taking place – and amendment after amendment was defeated – the pound dropped against the euro and the US dollar amid all the uncertainty.
What did MPs vote for?
When all the votes were in, just two amendments were passed. The Spelman/Dromey amendment passed with a majority of just eight, but it’s an important one for the UK and the pound as it rejects the UK leaving the EU without a deal. The Brady amendment, which passed with a majority of 16, supports the existing Brexit deal, with the proviso that alternative arrangements are found to replace the controversial Northern Ireland backstop.
Does this mean the Brexit deal is all agreed?
The votes last night didn’t really provide any further clarity, and indeed muddied the waters further. An amendment asking for more time to find a solution to the Irish backstop was rejected, and there was no detail in the Brady amendment to suggest what that alternative arrangement might be. It was a similar picture regarding no deal – MPs voted against the idea of no-deal, but other votes which gave parliament time or powers to prevent it or give some teeth to their conviction was rejected. The outcome is that parliament rejects the Irish backstop, but has no clear alternative and wishes to prevent no-deal, but has no clear picture of how this will be achieved.
What happens next?
During the debate, Theresa May committed to returning to the EU to renegotiate the Brexit deal. It’s likely that she has a challenging day ahead, the EU has already categorically stated that the Irish backstop is the best possible alternative and that there will be no renegotiation. Theresa May doesn’t appear to have much to negotiate with – parliament rejected the proposed deal soundly, but no clear picture of what the deal should look like has emerged. There are clear concerns on both sides about a no-deal scenario but to date, neither side appears to want to be the one to blink first and take action to prevent it.
What does this mean for the pound?
During the debate and voting on amendments, the pound dropped, and rose again after all the votes were in to make gains early this morning. As for the future, sterling’s fate is as uncertain as the Brexit deal. While parliament can’t come to an agreement, and the EU stand firm, no-deal Brexit looks increasingly likely and that could be bad news for the pound. On the other hand, if there is some room for renegotiation in the coming days and a better Brexit deal emerges, that could give sterling a boost. There is still so much that is unknown, and that will certainly put pressure on the pound. The outcome could be anything from no deal to an extension to find a solution to a complete abandonment of Brexit and withdrawal of Article 50. While everything is still on the table, the pound is likely to be vulnerable to the progress of negotiations and rumours of what the outcome may be.