For all the noise on Brexit, nothing important has changed

Brexit is back in the headlines (for a change).

There's been a lot of noise.

But for all the talk of chaos and pandemonium, it's pretty clear where markets think we're heading.

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What does "no Brexit" actually mean?

Let's define our terms before we start here, because there's an understandable bit of confusion around what some of them mean.

When I say "no deal" Brexit, what I mean is Britain leaving the EU after 29 March with no specific agreement about our future relationship agreed. This is the option that sends spasms of panic through the commentariat.

When I say the "withdrawal agreement", that means Theresa May's deal, the one with the backstop that no one can agree on. When I say "soft Brexit", I mean one that's even softer than May's deal something along the vague lines of whatever the Labour party claims to want today.

And when I say "no Brexit", I mean staying in the EU.

That all clear? Right, let's run through this again.

The papers are going on about chaos and losing control and "humiliating defeats" and having fun with headlines, but that's all Westminster bubble stuff.

All you really need to know is this: on Tuesday, May's withdrawal agreement got voted down again. But yesterday, MPs also voted to reject "no deal". One reason it all got a bit chaotic is that they not only voted to reject "no deal" on 29 March, they crammed in an amendment against May's wishes to reject "no deal" under any circumstances.

Now, none of this has any legally binding power. At the moment, the situation is that Britain is leaving the EU on 29 March. Unless Britain asks for an extension and all members of the EU agree to it, Britain will still be leaving whether or not a majority in the House of Commons has voted to reject "no deal" forever or not.

And some people continue to remind us of this fact. Michel Barnier, the EU's chief negotiator, argued that "the risk of no deal has never been higher. I recommend not to underestimate that risk and its consequences".

Could we "accidentally" exit? Could we end up reaching 29 March with no other agreement on the table and then simply leave?

Always bet on the path of least resistance

Anything is possible. However, with these situations it's usually best to work out where the path of least resistance lies. And for both the EU and the UK, the path of least resistance is to delay and to end up with a softer form of Brexit (or none at all).

Today, MPs will vote on whether to ask the EU to extend Article 50. That will probably pass. There's an EU summit on 21-22 March and the assumption is that the EU would grant a short extension at that meeting.

But before then, May is going to ask Parliament to vote on her deal yet again next week, in the hope that she'll get it over the line this time by effectively pointing out that it's either her Brexit, or risk no Brexit at all.

It's hard to say how that will play out. But if you take a step back, put aside your feelings either way and try to be realistic about it, then there really are only two realistic outcomes.

You get May's deal in which case, Britain does leave some time this year, and then there's a long transitional period during which we try to hammer out exactly what Brexit will look like.

Or you keep delaying the decision. And what happens then is that the momentum starts to shift towards "remain". You might still get a perfectly satisfactory Brexit deal. Indeed, there are also likely to be "indicative" votes today on potential other Brexit scenarios. Perhaps if the House of Commons can coalesce around one of those options then they'll have found a way forward that works for everyone.

But if the delays go on for too long, the risk for the "leavers" is that the pro-remain faction feel increasingly emboldened, the public feel increasingly disillusioned, and if everything gets delayed for long enough, then you end up with no Brexit at all.

What happens next?

It's pretty clear what markets think will happen now as far as they are concerned, it looks as though no-deal is pretty much off the table. Sterling shot up last night and, while it's edged a bit lower today, that's what you'd expect.

If there is a risk now, it's probably more that we end up with elections in the UK when there is still no agreement on exactly what to do about Brexit.

Phillip Hammond might have been pretty upbeat on the economy yesterday, waving potential carrots in front of his colleagues in the House of Commons but none of that money will be forthcoming if there's no agreement on a way forward.

But ultimately, all of this is admin. And as I've said in the magazine this week, markets sometimes rather like political gridlock. While politicians are distracted by Brexit, markets might just be glad to enjoy a bit of respite from the risk of yet more interventions.

In short, nothing's changed. British assets still look reasonably cheap, particularly relative to others. If you've been letting Brexit put you off, I would stop fretting about it.

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