It might not look like it, but progress has been made

After a further frantic few days in Parliament, including a highly unusual Saturday sitting, Brexit looks no clearer than ever. But while much remains unaltered, some probabilities have actually changed.
A Halloween exit is looking unlikely. The Benn Act, the Letwin Amendment and the failed timetabling of the exit legislation this week combined to reduce substantially the chance of leaving on Thursday 31 October. It appears that ongoing EU membership will continue for a little while longer.
A ‘no-deal’ exit should be highly unlikely (in the short term). The Prime Minister may not give this impression. Indeed, he declared that ministers would re-double mitigation efforts for this highly disruptive outcome after the legislative timetable was thrown out. But the dynamic in Parliament, together with the European Union’s engagement with the request for an extension of the Article 50 negotiating period, have acted as a lock on ‘no-deal’ for now.
There is one (big) caveat to this: if the PM’s (apparently failed) election gambit (discussed below) leads the EU to despair of the purpose of an extension (there will, at the very least, be off-line expressions of extreme exasperation) and they offer nothing, or a very short period, then an accidental (or provoked) ‘no-deal’ could still happen. My faith in pragmatism remains, however, and the EU has shown little willingness to have its fingerprints anywhere near the scene of a ‘no-deal’ outcome to date. I trust that will not change.
Real progress has been made – yes, really – but there are no guarantees of more. The principles of the legislation which will give effect to the Withdrawal Agreement treaty were actually approved by the House of Commons this week. This was the second genuine milestone achieved by the Prime Minister, having succeeded in re-negotiating the exit deal (albeit within the boundaries of well understood EU red lines). However, the legislative coalition which delivered the ’Second Reading’ is fragile, depending as it does on unpredictable Labour support and shorn of Northern Irish MPs, angered by the customs concessions made to Ireland and the EU.
As for an election, well. There will need to be an election, most agree, but maybe not quite yet. As I prepared to hit ‘send’ on these thoughts (timestamp: 8pm on Thursday…), Labour had just announced that it would abstain on the Prime Minister’s intended election vote this coming Monday. In retaliation, the Brexit legislative ‘pause’ could become a hard ‘stop’, it is suggested. So instead of the traditional Halloween horrors, we now appear to face a zombified political process. It was always touch and go to get an election this side of Christmas, and Mr Johnson has applied great energy to deliver one. What happens next is a lottery, however. Is the No10 calculation that the EU now gives up on the UK and offers no extension or a very short one, as rehearsed above? The stakes on this gamble are high.
As an escape from all this, don’t bet on a referendum as an alternative to an election (yet). In the midst of all this political calculation, the hopes for another referendum, expressed loudly by the crowds gathered outside Parliament last weekend, are likely to be dashed. There still does not seem to be enough appetite amongst MPs, many of whom privately would love it to happen, to vote for a referendum. Liberal Democrats, ‘former’ Conservatives and Labour centrists do not have the numbers, it appears.
And let us not forget that, meanwhile, the long-term UK/EU relationship is getting little attention. In just over a year’s time (unless there is a new type of extension) we will be outside the EU. The aspirations for the future relationship are now narrowly defined, in the (non-binding, but still important) ‘Political Declaration’ accompanying the Withdrawal Agreement. The revised Declaration is now even more narrowly focused on a free trade deal prioritising manufacturing. Even there the proposed arrangements would be a substantial change in trading terms for many companies held in PE/VC portfolios. And elsewhere in the Declaration there is very little at all on the services agenda which matters hugely to our sector and its wider ecosystem. We remain focused on that.
Finally, in other news, the House of Commons Treasury Select Committee has a new chair. We have just seen gamekeepers and poachers play musical chairs - Nicky Morgan had stood down from this central role on one of Parliament’s most important scrutiny committees and returned to the cabinet, while Mel Stride departed the government and has now been elected to replace her. As a former Treasury minister, who has done more legwork on Finance Bill legislation in recent years than most, he knows the broad territory well and will have an eye to financial services, too. We will keep you posted on his and the committee’s agenda.
Michael Moore
Director General, BVCA