None of the eight Brexit alternatives that were put to the vote yesterday in the lower house of the British Parliament was able to command a majority. The initiatives in favour of a customs union and a so-called “confirmatory vote,” in which population would have the last word on any agreement with the EU, attracted the most support.
So the Brexit drama drags on, fuelling doubts about the UK’s political institutions. It is hard to imagine a more compelling sign of political failure. It would hardly be surprising if disenchantment with politics were to increase as a result. We still continue to assume there will be an orderly Brexit. However, there is an increasing likelihood that the United Kingdom will leave the EU on 12 April in a disorderly process. The warnings about the consequences that would follow this that are coming not only from the British economy, but also from other EU countries are becoming more urgent every day.
In the event of a disorderly Brexit we expect the UK will fall into a deep recession and that growth will slow by 0.5 percentage points in Germany and in the eurozone in 2019. Given the currently fragile state of the economy in Germany and in the eurozone, a short recession cannot be ruled out here, either.