The European Council endorsed the Brexit Withdrawal deal on 25 November. The next step is to get the approval of the UK Parliament on 11 December. There is a relatively high chance that it will reject the deal. However, we believe there is still leeway to get the whole ratification process done in time by 29 March 2019 and avoid a no Brexit deal (while we assign a 25% probability to this scenario). In case of rejection, the Parliament has 21 days to bring amendments and trigger a new vote in January. However, the EU seems unwilling to get back to the negotiating table. If approved after a second try, the EU Parliament could ratify the deal by 14 February. If not approved, several options are possible: (1) PM May resigns and there is a leadership contest within the Conservative Party; (2) a referendum on the deal is called by the Parliament; or (3) general elections are called either by PM May or by the Parliament. In either case, an extension of Art. 50 beyond 29 March 2019 is likely. All in all, we estimate the cost of this uncertainty at -0.1pp lower growth in both Q4 2018 and Q1 2019.
