Cross-party amendments to 'meaningfully change' Brexit risk balance - Citi

An amendment tabled by Labour MP Yvette Cooper and sponsored by Conservative Nick Boles, among MPs from other parties, would seek to extend Article 50 if there was a likelihood of a no-deal departure.

The Cooper amendment would de facto change the default legal outcome from the current no-deal exit on 29 March to an extension of EU membership.

Economists at Citigroup argued that Cooper's amendment "could meaningfully change the balance of probabilities between the outcomes currently plausible", and should "lower the probability of a no-deal exit".

However, the Citi team also felt that, paradoxically, the amendment would also raise the probability of Prime Minister Theresa May's withdrawal agreement being passed.

"The reason is that if the choice were narrowed down to this deal or no exit on 29 March, it is plausible that a substantial number of hardline 'leaver' MPs may shift their support to the Prime Minister’s deal, rather than facilitate an extension. Either way, a reduction of the probability of no deal ought to be positive for economic sentiment."

A second amendment was also put forward on Monday by former attorney general Dominic Grieve, which could lead to indicative votes being held in to investigate potential common positions.

Hailed by some parts as providing a much-needed diluting of government power in times when parliament is fairly equally split, but decried by traditionalists as a huge constitutional shift, the change is expected to rebalance power away from government and towards parliament, by giving backbenchers more leeway to set the legislative agenda, independent from or even against, the government’s wishes.

Citi said it may have longer-term implications by making it more difficult for the government to prevent legislative initiatives by backbench MPs that interfere with its own agenda, which would become particularly meaningful in situations where the number of political parties represented in parliament increases and where no party has a sufficient majority of its own.

"Given the current trends in politics across the UK (similar to the rest of Europe) both situations are increasingly plausible over time. So while market-friendly in the near term (in the sense that it decreases the likelihood of no-deal exit) the Grieve amendment may also be marginally detrimental to the business environment in the UK over the long term."