Can this realistically happen given what has taken place to date, I refer to the time ?
Yes, if the Parliament hold an emergency debate soon under Standing Order 24, and we would expect House of Commons Speaker Bercow to facilitate MPs' efforts to put forward legislation, but timelines will be extremely tight. Should legislation fail, the only option left for MPs will be a motion of no confidence in the government. Based on the above timelines, there would be two windows for such a motion. The first would be this week. The second would be in the last two weeks of October.
Exactly what would happen at these two stages?
In the first window, the government would be in control of the timing of an election in the first window, however, and could in theory schedule one for after the 31st October. In the latter window, there would be no time left for a general election before the October 31st deadline, meaning that the only way for MPs to ensure no deal is prevented is via the formation of a government of national unity.
And what obstacles do you see to forming a unity government?
I would say the choice of political leadership and agreement on its aims.
So what could be the deciding factor now?
Much will now depend on the strategy taken by anti no deal MPs over the next two weeks. From whatever direction, the announcement has reduced Parliament's scope to maneuver but may also serve to crystallise parliamentary opposition to no deal.
And what can you tell us about how talks are progressing between the UK government and the EU? Could there be a compromise on the horizon?
Technical talks between the UK government and EU27 resumed last week, having been on pause for the summer break. The resumption of talks come as the recent press conference between German Chancellor Merkel and Johnson fuelled speculation that a breakthrough on the Northern Ireland backstop is possible over coming weeks.
And what is your take on this?
We believe there is room for compromise on the backstop. The EU27 would be willing to entertain additional guarantees concerning the backstop, including possibly a time limit. But the UK government demands the backstop is removed altogether. This is a step too far for the EU27.
At the same time, we also see the room for the Johnson government to change direction on the backstop as limited. Mr Johnson's pledge to remove the backstop has still not been sufficient to win the committed support of either hardline Brexiteers within his own party, or the Brexit Party.
What could be the consequence?
The political downsides for a last minute compromise with the EU27 are clear. Should Mr Johnson u-turn on the backstop, he faces the prospect of possible defections to the Brexit Party from his own MPs, and a resulting general election in which the Conservatives lose substantial vote share to the same party.
Let’s talk about the next steps – what should the market focus on?
In terms of near-term sequencing, the next focus for the market will be on the strategy adopted by anti no deal MPs this week (whether to adopt a legislative route or a confidence motion).
What happens if Parliament vote the government down in a confidence motion this week?
Pursuing the confidence motion course this week would be a high risk strategy for anti no deal MPs as the government could then choose to schedule any election after the October 31st deadline.
What does this mean exactly?
This means that anti no deal MPs need to be sure agreement on a unity government is possible before triggering a vote of no confidence.
Before we finish up can you tell us what indicative probabilities you see?
We retain our view that a no deal Brexit is a 50/50 chance, with the most likely path to preventing one from occurring the formation of a national unity government either in early September or late October.
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