Countdown to Brexit: Will the UK Leave on Halloween?

New UK Prime Minister Boris Johnson has vowed to deliver Brexit by the October 31 deadline, “do or die.” This will not be easy given that Johnson faces the exact same impasse that led to the downfall of Theresa May: The UK Parliament has rejected the withdrawal agreement that May struck with the European Union (EU), the EU has stated firmly that it will not renegotiate that agreement, and the majority of members of Parliament (MPs) remain opposed to the UK leaving the EU without a deal being agreed upon.

In the fifth of a series of updates, Quentin Fitzsimmons, fixed income portfolio manager and T. Rowe Price’s resident Brexit specialist, provides an overview of the current state of play.

What Are The Potential Scenarios?

Theoretically, there remain four possible scenarios, though (as we will explain later) only two of them are realistic.

1. The UK government fails to get a deal approved by Parliament, and the UK exits the EU on October 31 without arrangements in place and with no transition period to enable business and people to prepare. UK trade with the EU is immediately governed by World Trade Organization rules.
2. A further extension to Article 50 is granted, most likely pushing the deadline into 2020. This is only likely to occur if there is a specific reason to delay—for example, to allow time for a general election and/or a new referendum.
3. Against the odds, Prime Minister Johnson wins some concessions from the EU, and Parliament passes an amended form of the withdrawal agreement.
4. Circumstances arise that persuade the UK government to revoke Article 50, suspending Brexit indefinitely.

What Has Changed Since Our Last Update?

Having failed three times to get the withdrawal agreement she brokered with the EU through Parliament, Theresa May resigned as leader of the ruling Conservative Party on May 24.