The latest Brexit twist means a long delay seems ever more likely

When it comes to educating the population about the plumbing of our democracy, Brexit is the gift that keeps on giving.

It's a bit like the subprime crisis. While the financial system worked, we all assumed that its foundations were sound. When it imploded, we realised they weren't.

Now voters are realising that they've made all sorts of assumptions about how democracy works. And now they're finding that those assumptions were wrong.

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To be clear, this is healthy. It's necessary. And like most learning experiences, it's a bit painful.

Another spanner in the works

The Speaker of the House of Commons, John Bercow, has gone back through his big book of Parliamentary precedent and found that in 1604, the House of Commons agreed that we couldn't leave the European Union (EU).

Oh wait, sorry, I've misread that. What they agreed was that you couldn't ask Parliament to vote on the same law twice.

To cut a long story short, this means that the speaker has decided that the prime minister cannot ask Parliament to vote again on her withdrawal agreement, the one they've already rejected twice, if there are not "substantive changes".

Handily enough for him, Bercow gets to judge whether or not a change is substantive enough. But what he did say is that just a change of opinion on the deal would not do. In other words, getting the attorney general Geoffrey Cox to be a bit more relaxed about the current structure of the "backstop" won't swing it.

Meanwhile, the EU side does not appear to be prepared to offer any kind of change in the agreement that doesn't just amount to words on top of words the legalistic equivalent of patting someone on the hand and saying: "Yes we know what it says in the paperwork, but it won't actually come to that".

(A bit like the way that the referendum was "advisory", but everyone agreed that this was just legalese, and that they'd abide by the result, until the result went in an unexpected direction.)

So it looks as though Theresa May's deal won't be going back before Parliament, unless another yet more arcane piece of legislation is deployed.

The big risk from a long delay to Brexit

I wouldn't rule out more constitutional small print coming out of the woodwork, including just shutting and re-opening parliament (which would get around the ruling on presenting the same bill twice).

But any more finagling would probably make it even harder to pass the deal. And it's worth remembering that May was always going to struggle to get it through Parliament. She hasn't managed it so far, and while it looked as though the hardliners were thinking about possibly considering coming around to voting for her deal, there was no guarantee.

So while the intervention by the speaker is definitely going to put a lot of people's backs up (that's the kind of guy he is), it may not have made a huge difference to what the outcome would have been, had the deal gone to a vote.

It does, however, make it very hard to see May's deal happening now. And while the eurosceptic side might be hoping that now Britain will simply cease to be a member of the EU on 29 March, that just seems like wishful thinking.

There's another summit in Europe later this week. The EU side can see that the tide has turned in its favour. Parliament is full of MPs who want to remain, and they feel ever more emboldened to abide by the letter rather than the spirit of the law.

The longer they can delay, the further the deal gets kicked into the long grass, and the more chance of softer or no Brexit. For Labour, the longer the delay, the higher the odds of a fresh general election. In short, the incentive structure is clear most MPs are in favour of getting more time.

So it does look to me as though the most likely outcome now is a delay. I also suspect that there's every chance that the UK will be taking part in the European elections.

What does all of this mean for markets? UK assets have been sold down because of fears over the effect of Brexit, no doubt about it. I always felt those were overblown. And given where UK assets are now, I still think they're worth buying.

(Just don't be surprised to see more fits of nerves between now and the end of March, as a lot of this stuff will get done at the last minute, despite all the talk of trying to get extensions agreed before "a minute to midnight".)

However, what markets may start to underestimate, is the risk raised by "no Brexit". If there's a lengthy delay, it is very hard indeed to imagine Theresa May being able to cling on to power, regardless of how much of a poisoned chalice the leadership has become. It won't stand.

The obvious risk then is that you get a general election. And the obvious risk that follows on from that is that you get a Jeremy Corbyn-led government. And if you thought that markets were worried about Brexit, you ain't seen nothing yet.

I still think that's a low-risk outcome. But as Brexit retreats, the prospect of a Corbyn government advances (ironic, given that the Labour leader is about as dyed-in-the-wool a leave voter as you could get).

One to keep an eye on. And another good reason to own a bit of gold in your portfolio.

John's book, The Sceptical Investor, is out now MoneyWeek and Money Morning readers can get 25% off by clicking here.