U.K. Parliament Gives Theresa May Approval To Start Brexit

Moments ago, UK Parliament passed legislation giving prime minister Theresa May approval to start the Brexit process and allowing the government to invoke Article 50, with the House of Commons overturning amendments from the unelected House of Lords that sought to limit May’s room for maneuver.  While press reports earlier said May could trigger Article 50 as early as Thursday, subsequent reports from Bloomberg suggested that she will commence Brexit in the last week of March.

The victory for May in Parliament, where she has a slim majority, allows her to negotiate Brexit with a free hand and consolidates her hold on power in the ruling Conservative Party. That said, according to Bloomberg she now faces the simultaneous challenge of pulling Britain out of the EU on good terms while navigating a second constitutional upheaval: Scotland’s renewed bid for independence.

On Monday evening, lawmakers rejected two revisions by unelected peers which would have guaranteed rights for EU citizens living in the U.K. and given Parliament a final binding say on what May negotiates with the EU. The government argued against the changes, saying it wanted to preserve May’s flexibility in the talks. While some Tories had signaled they might vote against the government, several would-be rebels fell into line, or abstained. As Bloomberg adds, May will address the House of Commons on Tuesday, although she isn’t expected to fire the starting gun on exit talks yet.

Waiting until the end of the month will avoid souring the March 25 celebrations in Rome of the 60th anniversary of the EU’s founding treaty and allow her to avoid the Dutch election on March 15 and the Scottish National Party’s conference on March 17-18. With March 26 a Sunday and the British Parliament on recess on March 31, the likeliest days for the notification are March 27 to March 30, a Bloomberg source said.

Once May pulls the plug, the EU would respond to an Article 50 notification within 48 hours European Council President Donald Tusk said last week that. The European Commission will then publish legal rules for the talks, spokesman Margaritis Schinas said on Tuesday.

Potentially complicating matters for May is the announcement earlier on Monday by Scottish First Minister Nicola Sturgeon that in one week she would start the process of getting permission to hold a second independence referendum. Scotland voted to remain in the EU and Sturgeon says May’s determination to take Britain out of the single market against Scotland’s wishes makes a plebiscite necessary to address a “democratic deficit.”

As Bloomberg notes, Sturgeon’s threat means the harder the break with the EU, the louder the calls for Scotland to secede will be. Nick Macpherson, a former Treasury official, last week tweeted that the government’s “uncompromising approach to tearing up partial membership” of the EU was “putting at risk the 300 year Union which made Britain Great.”

As for the market's reaction, with sterling having tumbled in recent weeks, the response to the news was non-existent, as cable barely moved by 5 pips.


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