Top Wall Street banks are expressing confidence that British Prime Minister Theresa May will be able to either get a Brexit deal through Parliament before the 29 March deadline, or extend the deadline to win time to amend the proposed accord.
Kristian Rouz — Two major Wall Street banks expect either a delay of the Brexit deadline, or a divorce agreement to be achieved before March 29. Meanwhile, the British public and the City of London are bracing for an increasingly likely “no-deal” scenario, after Prime Minster Theresa May lost another Brexit vote in the Commons Thursday.
Experts from US investment bank Goldman Sachs said they believe there is a 50-percent chance that PM May will be able to reach an agreement with the EU to amend the proposed Brexit accord, so that British MPs could support the deal. Goldman’s analysts say the prime minister is likely to achieve her goal of delivering an orderly Brexit before the 29 March deadline.
However, experts from JP Morgan say PM May will be able to convince Parliament to delay the Brexit deadline, or Article 50, to allow her more time to negotiate a mutually-acceptable agreement with the EU.
This comes after May suffered another Brexit defeat in Parliament after asking MPs to extend Article 50. Hardline Brexiteers within the Conservative Party opposed the prime minister’s request, which some political experts say might have marked the end of so-called “Tory truce” — or a compromise with the PM’s party to support her handling of the Brexit process.
“The irony of all this is that most of us in the Conservative Party are sufficiently united to want to try to operate a coherent Government. But the truth is we’re finding it harder and harder to do”, Dominic Grieve, former Attorney General and a Conservative MP said.
Goldman experts said the MPs will likely be able to block a “no-deal” scenario if PM May failed to achieve her objectives. They said there is currently a 15-percent chance of a no-deal Brexit, while the probability of no Brexit at all stands at 35 percent.
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While there is still a 50-percent chance of PM May getting a deal through Parliament in some form, she appears to be facing mounting pressure from the Irish unionists and hardline Tories, who would rather accept a “hard Brexit” than any other scenario.
The May cabinet is a coalition government of Northern Ireland’s Democratic Unionist Party (DUP), the British Conservatives.
PM May is seeking to convince the EU to drop the so-called “Irish backstop” from the proposed divorce agreement — a clause that would keep the border between Ireland and Northern Ireland open, but would create some barriers between Northern Ireland and the UK.
Both the DUP and hardline Brexiteers oppose the backstop clause, which the EU sees as an “insurance policy” so that the UK doesn’t actually bring back a hard border across the island of Ireland.
Goldman analysts say PM May will most likely succeed at getting the backstop removed, possibly, by providing the EU with sort of a guarantee of no hard border across Ireland. Despite PM May’s claims doing that would require additional time to talk with the EU, Goldman experts are optimistic — there’s still enough time until 29 March to get that done.
“There does exist a majority in the House of Commons willing to avoid a ‘no deal’ Brexit (if called upon to do so), but there does not yet exist a majority in the House of Commons willing to support a second referendum (at least at this stage)”, Goldman experts said in a note.
Meanwhile, JP Morgan sees a higher probability of Article 50 being extended, despite PM May’s most recent fiasco in Parliament. Experts believe the prime minister will now focus on delaying the Brexit deadline rather than advancing talks with the EU.
“Having chosen to afford the PM extra time this week, our expectation is that a majority of MPs will finally be prepared to begin to take action to attempt to ensure that a ‘no deal’ exit does not occur at that point”, JPMorgan said.
However, some British Conservative MPs say a “no-deal” would be a better outcome than any form of a fragile agreement with the EU. Tories also point out that most major financials said the UK would vote “Remain” in the Brexit referendum in June 2016, suggesting Goldman and JP Morgan might be wrong this time around as well.
“We’re sticking up for what people voted for”, Jacob Rees-Mogg, Conservative MP and an avid Brexiteer, said. “Fundamentally, I believe, you trust the people and deliver on referendum results”.
Wall Street bankers said they expect a “last-minute deal” between the UK and EU. But in Europe, different sentiments prevail. According to one of Europe’s oldest banks, Berenberg, the probability of a “no-deal” stands at 30 percent, while May’s chances to get a deal through Parliament are 10 percent, and no Brexit has a 20-percent probability.
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British lawmakers are set to hold the next round of Brexit votes on 27 February, with Prime Minister May either brining an amended Brexit deal to the table, or requesting an extension of Article 50.