Boris Johnson Revives No-Deal Brexit Threat With Change to Law

LONDON (Capital Markets in Africa) – Boris Johnson will change the law to ensure the Brexit transition phase is not extended, setting up a new cliff-edge for a no-deal split with the European Union at the end of next year. The pound erased all its gains made since last Thursday’s general election.

The U.K. prime minister wants to deliver his election promise to ratify a new free-trade agreement with the bloc before the bridging period maintaining the status quo runs out on Dec. 31, 2020.

EU leaders have warned it’s highly unlikely negotiators can complete the kind of deal Johnson wants, which he’s modeled on Canada’s agreement with the EU that took seven years to finalize, ahead of the deadline. Sabine Weygand, director-general for trade at the European Commission, said Tuesday Johnson’s intention to prevent any delay would require the EU to prepare for a potential “cliff-edge situation” if a trade agreement can’t be reached.

But U.K. Cabinet minister Michael Gove rejected the idea that the U.K. will leave the EU’s trade orbit without a new deal in place, saying the bloc has promised to conclude the negotiations by the end of 2020. “We are going to make sure we get this deal done in time,” he told the BBC.

 “It’s time for us to come together and deliver on our one nation agenda.”
While visiting Sedgefield, one of the Labour strongholds that his Tories managed to turn in Thursday’s election, U.K. Prime Minister Boris Johnson said Brexit is “unstoppable”

Johnson’s gambit is the latest sign of intent as he seeks to force through Britain’s divorce from the 28-nation bloc without further delay. After winning a big majority in last week’s general election, the prime minister now has the power to do as he pleases on Brexit, without fear Parliament will thwart his plans.

His move also suggests he’s trying to apply pressure to EU negotiators to make concessions in trade talks by enshrining the threat of a no-deal crash into law. “We’ve seen before how deadlines can concentrate minds,” Gove said.

Johnson will start by putting the divorce part of the Brexit deal to a vote, potentially as soon as Friday. Once MPs have ratified that, the U.K. will leave the EU by Jan. 31.

The planned legislation will include legal text to prevent the government from extending the transition period and delaying the day Britain stops being subject to EU laws, even if no new trade terms have been secured in time, an official said.

Deadlines, Continuity
The law would potentially force the U.K. out of the EU without a new deal in place, threatening tariffs and disruption to trade. In a research note, JP Morgan economist Malcolm Barr put the chance of a no-deal Brexit at 25%, “a number we regard as uncomfortably high.”

As well as ministers being blocked from extending the transition period, the House of Commons will not get a vote on the issue, another official said.

When ministers were trying to get support for the Brexit deal before the election, they agreed to give Members of Parliament a vote on whether a longer transition period would be needed. But the government’s new majority means such compromises aren’t necessary, the official said.

Other concessions granted to try to smooth Johnson’s deal through Parliament in October, including protections for workers’ rights and a promise to give MPs a say over talks with the EU, will also be scrapped, the Times newspaper reported, without saying where it got the information.

Johnson’s plan to give priority to delivering Brexit was also reflected in appointments to his cabinet, announced Monday evening, which put the emphasis on continuity as he seeks to minimize disruption before the Jan. 31 deadlines.

Nicky Morgan, who had announced she was standing down as an MP before the election, has been handed a seat in the unelected House of Lords so she can stay on as culture secretary. In the only other senior appointment Monday evening, Simon Hart became Welsh Secretary in a move forced on Johnson after the resignation of Alun Cairns from the post in November.

Other key positions in the cabinet, including the posts of chancellor of the exchequer, home secretary and foreign secretary, are expected to remain unchanged.

As well as providing stability in the run-up to Brexit, Johnson, who plans a wider reshuffle of his top team after the deadline at the end of next month, will have Morgan by his side to advise on the role of China’s Huawei Technologies Co. Ltd in U.K. telecommunications, a thorny issue as Britain seeks trade deals with the rest of the world after leaving the EU.

Source: Bloomberg Business News