For such a polarising topic, Brexit did manage to unite the country in at least one way over the past couple of months: nobody can talk about anything else, and everyone wants it to be over one way or another.
Instead, the UK has been presented with a seven-month extension to its departure date. The opening weeks of this stay of execution have been used to take a collective breather, but further twists are unlikely to be too far away.
From UK advisers’ perspective, the daily developments have little specific impact on their business. But the economic uncertainty, if not paralysis, that has resulted cannot be underestimated. From a moribund housing market to the possibility of a new government, the UK’s exit from the EU hangs over intermediaries’ livelihoods as much as it does their personal lives.
“For the time being, the only certainty is that the extension means more uncertainty for longer. That will continue to weigh on business decisions – notably on investment – in turn resulting in sluggish economic growth and poor prospects for an already depressed productivity performance,” says Silvia Dall’Angelo, senior economist at Hermes Investment Management.
Despite the views of the country at large, the political gridlock seen since the start of the year is arguably not due to the current batch of politicians being any worse than their predecessors. It’s simply a belated confirmation of the result of the 2017 general election. Prime Minister Theresa May’s insistence that “nothing has changed” has finally collided with the hard truth that she lost her parliamentary majority two years ago.
The other disadvantage to intransigence as an operating policy is that it tends to be mirrored by other actors. For all the talk of a compromise in the “national interest”, or a government of “national unity”, few want to make concessions. Polling numbers for leaving without a deal or revoking Article 50, respectively, indicate that attitudes have only hardened since the referendum.
A year of elections?
Nonetheless, now that Mrs May has begun negotiating with the leader of the opposition, a compromise is closer to fruition than it has been at any time since 2016.
Whether it will move any nearer is up for debate: both the prime minister and Labour would arguably be in favour of an agreement that sees the UK leave the EU while remaining part of the customs union. But both are aware that this is a deal that, for the moment, would satisfy neither Leavers nor Remainers. From Labour’s perspective, there is also a polling benefit to guaranteeing UK participation in European elections.
The outcome of those elections, coupled with the local voting taking place earlier in the month (see Box 1), could be enough to prompt a return to the polls of a more significant kind. Most analysts agree that the likelihood of a general election has increased in light of recent developments – either called by the prime minister in a bid to restore her parliamentary majority, or by a new Conservative leader seeking a mandate for their own Brexit strategy.