BREXIT SCENARIOS AND BUSINESS RISK IMPLICATIONS

Boris Johnson becomes Prime Minister on 24 July having declared the EU Withdrawal Agreement negotiated by his predecessor to be “dead”. However, he inherits the same divided parliament, a deeply split party and an EU leadership which maintains that the Withdrawal Agreement is not open for re-negotiation.

Parliament is in summer recess until 3 September, after which the political brinkmanship of recent months will resume towards the current Brexit deadline of 31 October. We assess there to be three scenarios under which the situation could develop over that time:

  • In the first and marginally most likely scenario (40% likelihood) Johnson eventually requests a postponement of the 31 October exit date despite campaign promises not to do so. This would be driven by the alternative of facing a vote of no confidence and possible early general election which could make him one of the shortest serving Prime Ministers in British history.
  • In the second scenario (35% likelihood), Johnson’s approach to Brexit triggers an early general election, either forced upon him by a no confidence vote or chosen as a deliberate political gamble. The outcome of such an election would be highly uncertain based on current opinion polling, but under some outcomes would make an eventual cancellation of Brexit more politically viable.
  • We assess a no-deal Brexit still to be the least likely of the three scenarios, at 25%. However, its likelihood has increased with Johnson’s election as leader and it could come about as a result of tactical miscalculation and constitutional ambiguity, despite stated opposition to it by a majority of MPs.

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