Geoff Cook

Geoff Cook


Brexit  - Deal or No Deal

March 2019

The streets of London were packed this weekend with hundreds of thousands of Remain marchers, determined to make their voices heard.

Mrs May has returned from Brussels without the 30th June extension she had hoped for, and instead must make do with 22nd May if her deal is passed in the House of Commons, and 12th April if not.

Fearing another defeat, the PM's Deputy David Lidington was reported to be engaged in a last ditch attempt over the weekend to build a cross party consensus between a no deal and the withdrawal agreement concluded with the EU.

Press reports have speculated on whether or not Mrs May can carry on, having lost the confidence of key Ministers and the European Council. Her searing midweek intervention, laying blame squarely at the feet of British MPs, appears to have misfired. MPs are after all the only people who could vote her deal through.

Can the House of Commons come up with a solution?

Parliament continues to be divided over the terms of the Brexit deal with the backdrop of a majority of MPs originally voting Remain. Rejecting no deal was relatively straightforward. Saying yes to something, and agreeing the detail is another matter entirely.

Deposing Mrs May will be no easy task with the 1922 committee unable to facilitate a leadership challenge until December 2019, and the fixed term Parliament Act providing a strong shield against Corbyn led calls for an election.

Despite losing out to Oliver Letwin’s indicative vote initiative Mrs May will only step down during the Brexit process if she chooses to. Meantime binary votes on different orders of preference will be a complex and difficult process.

Irrespective of who is PM or whether or not Parliament takes the driving seat, any revisions to the withdrawal agreement need to be acceptable to EU Leaders, who have indicated limited appetite for change.

What happens next?

29th March is no longer in play and the period to the 12th April could see a no deal confirmed simply by default through the passage of time.  Alternatively, a new House of Commons consensus may emerge, but with no certainty that the EU will agree it.

What is in the withdrawal agreement?

When faced with the extraordinary quantum of information generated over the 1,000 plus days since article 50 was triggered, it's easy to lose sight of the terms of the withdrawal agreement.  Ploughing through its 599 pages, not to mention the additional 26 pages in the political declaration, is a daunting task.

Withdrawal Agreement – what are the key points of interest?

When considering the agreement it's important to remember these are withdrawal terms and not the future trade deal:

Article image

You can find a more detailed but accessible summary here.  


There are Brexit implications for the devolved administrations, and the Crown Dependencies and Overseas Territories (CDOTs). As the Withdrawal Agreement 'key points' graphic above indicates, they haven’t been forgotten.

Citizens' rights to stay are clearly important as is a stable transition, and it's been confirmed that the common travel area within Britain will continue. In the case of the Crown Dependencies, industries such as fisheries and farming need new solutions.

However, it is UK manufacturing and supply chains that have the most to fear from a no deal crash-out.  With the CDOTs largely focused on financial services and not being major manufacturing centres, this should not be a significant concern for them.

The CDOTs governments have been proactively engaged throughout the Brexit process and comprehensive information is available on their Brexit strategies on their official websites. 

Examples can be see in the following links published by the Governments of Jersey and Guernsey.

Third country services are unaffected by Brexit

Economies in the CDOTs are heavily skewed to financial services with access to the EU through individual bilateral agreements negotiated sector by sector on an equivalence basis.   They are classified as third countries for market access purposes. This means that their legislation, regulation, and investor protection rules must all be assessed as substantially equivalent by the EU before market access is granted.

Equivalence status means that approved third country regimes receive protections through the EU single market rules:-

“In a second step, the Maastricht Treaty, which entered into force in 1994, introduced the free movement of capital as a Treaty freedom. Today, Article 63 TFEU prohibits all restrictions on the movement of capital and payments between Member States, as well as between Member States and third countries.”

Source: EU Parliament

Alternative Funds

Alternative funds are one of the primary CDOTs' financial services activities in EU markets.

And the CDOTs have the infrastructure in place to enable investment flows to continue seamlessly through tried-and-tested private placement routes into the EU. Whilst there may be a second order impact from any economic slowdown, the CDOTs financial and related professional services market access to Europe is unaffected by Brexit. They continue to provide an attractive safe harbour for promoters through uncertain times.

Economic impact

Estimates of the economic impact of deal or no deal scenarios vary greatly. Whilst many options will be proposed in the indicative votes, there are realistically only four main scenarios: deal, no deal, no Brexit or a longer delay.

In our view, each of these would have a different economic outcome in a range of plus 1.50% to minus 0.5% of GDP in 2019, depending on how hard or soft the Brexit experience. The worst case scenario of no deal would, we believe, trigger a short sharp recession. However, with the British economy currently the strongest in the G7, media predictions of an economic catastrophe are unlikely to materialise.

CDOT positioning

The CDOTs are part of the British family and a good neighbour to Europe; they are important investment partners to both sides of the Brexit equation. They continue to support and engage constructively as Britain and the EU search for a fair and equitable outcome.

As facilitators of hundreds of billions of internationally mobile capital, the CDOTs will continue to work together with their British and EU partners to build a better future, by providing the essential long term investment needed to develop jobs, growth and prosperity.

As this week unfolds, the shifting sands of the Brexit deal or no deal situation will intensify. Please look out for a further update on our  blog during next week.

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