Something Has Changed?

++ No Extension and No Deal creep closer ++

  1. Two important documents were released tonight.
    • The Unilateral Declaration by the UK lodges our interpretation of how we can unilaterally suspend the backstop.
    • The Instrument relating to the Withdrawal Agreement clarifies how arbitration works if either party wants to suspend the backstop.
  2. The two key paragraphs from these:
    • “Nothing stops the UK from trying to walk away”
    • “if you try to impose the backstop on us forever, we can walk away, unless the arbitration panel says you’re not trying to do that”
  3. We await Attorney General Geoffrey Cox’s advice, but there is a legal argument to be made here that the UK can initiate exiting the backstop and make a case with the arbitration panel to ignore the backstop.
  4. Unfortunately, there is also the legal argument that the UK can’t jump to the end of the process and just leave:
    • Keywords in the UD: “could ultimately lead”
      • It’s not a given. Saying “the backstop is dead” doesn’t mean it is.
    • Keywords in the Instrument: “unless and until the offending party has taken the necessary measures to comply”
      • Even if the UK believes the EU is trying to force it into an indefinite backstop, that depends on how the arbitration panel sees it
  5. The Motion that will be voted on tonight reflects that this is not a panacea for the backstop, as it merely “reduces the risk” of being in the backstop forever, not remove that risk altogether:
  6. This is just our interpretation. The truth is that MPs can spin this change however they want to. There is room to argue that you can now support the Deal. Brexiteer Mike Penning has just done so.
  7. He declares “no one is more Brexit than me” but he’s not a member of the ERG. However if we use his Brexit ranking of +5 then we can look at other MPs who might ideologically be able to shift (-15 is the most Remain, +15 is the most Leave). Of those MPs who have wanted a backstop renegotiation, 42 are as Brexity or less than Mike.
  8. If all of those flipped to backing the Deal, the PM would lose by 146 votes rather than 230.
  9. Gaining more than that depends on the DUP. Will they be willing to risk their Unionist credentials, their entire reason for being, on a legal interpretation that Northern Ireland could remain within the UK? Our man BallyMoney flags up this song and this century-old speech to point out that ‘No, they won’t’. Why would they? To go down in flames to protect the Union is all they’ve ever fought for and they’ll keep on fighting that fight, no surrender. Just think of how it will play out if the arbitration panel keeps us in the backstop; headlines such as “faceless judges wreck our union” will be just the start of it.
  10. So, the PM’s Deal will fail.
  11. If it fails by more than 50, as looks likely, then there is an even more important paragraph from a document tonight. This is the last part of Juncker’s letter:
  12. In other words, an extension isn’t guaranteed, and even if you get one, it’s going to be a short one.
  13. No extension and No Deal creep closer.


john white

GBP seems to be holding up well, as does the UK stock market.
Markets seem to be discounting a benign outcome, despite all the political shenanigans (Presumably a Remain outcome eventually).


Yes the market has always expected a delay or a soft Brexit to be the eventual outcome. We believe that is largely driven by the overall low vol structure of the market and more extreme outcomes can’t be ruled out, particularly with volatility as low as it is. It’s discounting all the political noise but in this environment political accidents can easily happen.


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