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U.K. Starts ‘No-Deal’ Brexit Preparations as EU Poised to Delay

Andrew Atkinson
U.K. Starts ‘No-Deal’ Brexit Preparations as EU Poised to Delay

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The U.K. accelerated its preparations to leave the European Union without an agreement on Oct. 31 as the bloc was reportedly poised to give Prime Minister Boris Johnson more time, if he needs it, to work out a deal.

The government on Sunday activated “Operation Yellowhammer,” in which agencies and departments take action to offset the worst-case outcomes anticipated from an exit without a formal agreement. The deadline for leaving is the end of this month.

“We have now entered the final, most intensive stage” of preparations, according to a government official. “With less than two weeks until 31 October, hundreds of civil servants will from today move to work on these operational matters.”

Johnson’s plan to win approval of his newly minted deal with the EU was set back when the House of Commons, in a rare Saturday meeting, voted 322-306 in favor of an amendment that required him to ask the EU for the delay. Bound by a law he opposed, Johnson formally asked the EU to delay Brexit until Jan. 31. But he made clear that he’d rather Britain leave without delay and refused to sign the letter requesting an extension to his Oct. 31 target.

Johnson’s reverse knocked the pound in early Asian trading, though any weakness may be short lived, analysts at Credit Agricole and Natwest Markets wrote in research notes. Even though political uncertainty remains, both banks see a diminishing risk of the U.K. crashing out of the bloc without a deal, with Credit Agricole predicting the pound reaching $1.36 and Natwest forecasting $1.35.

The Times of London on Sunday, citing unnamed diplomatic sources, said the EU is ready to grant a three-month extension if Parliament fails to approve the deal, with the U.K. able to leave on the 1st or 15th of November, December or January if an accord is ratified. If Johnson calls a second referendum, or meets other obstacles, governments led by Germany would push for a longer extension, possibly pushing the deadline to June 2020, the Times said.

Gove’s Warning

One of the leading members of Johnson’s cabinet warned lawmakers on Sunday the country could crash out on Oct. 31 if Parliament rejectsJohnson’s Brexit deal.

Michael Gove said he was confident the prime minister had enough support in Parliament to get the agreement over the line as he warned that lawmakers had increased the risk of a no-deal Brexit by forcing Johnson to ask the EU for a delay. A vote on the plan could come as soon as this week.

“If we don’t back this deal, then the risk is that the European Council may not grant an extension,” Gove, who is in charge of no-deal Brexit preparations, told Sky TV’s “Sophy Ridge on Sunday” show. “We can’t bet on that. It’s not a sure thing.”

Hours after the Saturday vote, French President Emmanuel Macron made it clear the deal had been negotiated and that further delay in Britain’s departure was “in no one’s interest.” However, Finnish Prime Minister Antti Rinne said Sunday that it would be “sensible” to grant an extension. A unanimous agreement among EU nations is needed to approve a delay.

Johnson now plans to push through the legislation needed to take Britain out of the EU at the end of the month, and the slender margin of Saturday’s vote suggests he could succeed.

Timetable

The Withdrawal Agreement Bill could begin its journey as soon as Tuesday, after Johnson makes another attempt on Monday to get Parliament to sign off on the principle of his deal. If a vote is permitted tomorrow and Johnson wins, he could withdraw the request for an extension.

“We’re going to deliver by the 31st of October,” Gove said. “We are going to ensure that we get this deal done and I’m confident that with the support of good people with whom we may have disagreed in the past, but who respect democracy, we will get this deal done.”

Foreign Secretary Dominic Raab also expressed optimism, telling BBC TV’s “Andrew Marr” show that “we appear to have the numbers to get this through.”

Johnson received a boost earlier Sunday when former cabinet minister Amber Rudd, who walked out of the government and the Tory party in protest at the expulsion of 21 colleagues, said she and many among those kicked out are ready to support his deal.

“We do want to leave with a deal and this deal from the prime minister is good enough for me,” said Rudd, who backed the Letwin amendment that forced the delay.

Labour and DUP

Johnson also has the support of a small number of Labour MPs, though he may struggle to win over many more with the party calculating that a wounded Johnson would be easier to take on in the likely general election to come.

Jeremy Corbyn’s leadership is seeking safeguards over issues from the environment to workers’ rights. Crucially, it wants a customs union with the EU and for any deal to be put to another referendum with an option to stay in the EU, areas in which Johnson is highly unlikely to compromise.

His key problem could lie in wooing back his allies in the Democratic Unionist Party, whose 10 votes on Saturday made the difference between defeat and victory. The Northern Irish party has deep reservations about anything that creates any kind of border between Britain and Northern Ireland, such as customs checks in the Irish Sea, and wants a stronger consent mechanism that hands a greater say to the regional assembly.

To contact the reporter on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, James Ludden, Steve Geimann

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