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May's chance to get Parliament's nod on Brexit deal in danger

As the U.K. enters yet another crucial Brexit week, House of Commons Speaker John Bercow delivered a crucial blow to Prime Minister Theresa May's ability to secure parliamentary backing for her withdrawal deal in what may be her final chance to get it passed before the U.K. is due to leave the European Union on March 29.

Bercow on March 18 said Parliament cannot vote again on May's Brexit deal, saying a vote would happen only with a significantly changed agreement.

The House of Commons had been expected to hold a third "meaningful vote" on May's withdrawal agreement in the coming days after it backed on March 14 a government proposal delaying Brexit until June 30 as long as a deal can be passed by March 20. That followed lawmakers' voting down of May's deal for a second time March 12 and ruling out a no-deal Brexit in a separate vote March 13.

May has warned lawmakers that if her deal is discarded again, a much longer delay to Brexit would be needed, requiring the U.K. to take part in European Parliamentary elections in May.

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3rd meaningful vote, short extension

A vote on a Brexit deal, if there is a new deal, could be held March 19 or March 20 before a European Council meeting March 21 and March 22. The deal will only be put forward if there are chances it will be approved, U.K. Chancellor Philip Hammond told the BBC.

In case a deal is approved, the European Council is more likely to agree to a shorter extension than a longer one, avoiding the U.K. having to take part in European elections.

A possible extension would require unanimous approval of all EU member states, and disagreements have been reported among European leaders over the terms of a delay.

Longer delay

If a Brexit deal is not passed by March 20, May would likely ask the EU for a longer extension to allow the U.K. Parliament to find consensus on a different approach to Brexit, according to Moody's.

"How long the extension would last is still not determined, but we think that a yearlong extension is the most likely scenario," Moody's said.

The U.K.'s EU membership could terminate July 1 if the country seeks an extension beyond June 30 without participating in European Parliament elections, the Financial Times reported March 15, citing a document outlining conditions for a delay.

European Council President Donald Tusk has urged EU leaders to be open to a longer extension, if needed. However, a longer delay is not expected to sit well with Brexit hardliners, Danske Bank has warned.

Customs union, 2nd referendum

If the U.K. does secure a longer delay it may result in a softer Brexit that leaves the U.K. in the EU customs union and the single market. It also raises the possibility of a second referendum on Brexit, even though a proposal on returning the matter to the electorate was defeated in Parliament on March 14, with several lawmakers abstaining.

"Most of the [members of Parliament] which abstained said they did so because they considered this not the time to debate a second referendum, and the amendment could be easily brought back in the coming weeks or months," Moody's said.

No-deal scenario

Although a no-deal Brexit was ruled out by lawmakers March 13, it remains the default path forward if a deal cannot be agreed and an extension is not granted. While seen as unlikely, EU chief Brexit negotiator Michel Barnier said March 13 that the current Brexit deal is the only one available and that the risk of a no-deal Brexit has never been higher.