The start of Brexit negotiations scheduled for June 19 is set to be delayed after a U.K. General Election produced a hung parliament on Friday morning.
The U.K. will have to clear the current political uncertainty and define its next government before it can negotiate with the European Union. At the same time, the country is under pressure given that the two-year time limit to conclude Brexit talks continues to tick.
“Perhaps the most obvious conclusion is that the likelihood of the U.K. needing to request a delay in the Brexit process has risen substantially, given the chance that political developments in the U.K. disturb what is already a time-compressed process,” JPMorgan said in a research note on Friday morning, according to Reuters.
David Stubbs, global market strategist at JPMorgan Asset Management told CNBC on Friday morning: “I don’t see how negotiations will start (on June 19).”
Theresa May called the election to garner stronger support and more power when discussing Brexit with the EU. However, this seems to have totally backfired raising questions as to who will negotiate Brexit and what sort of Brexit the country will look for.
Speaking on German radio, the EU’s German commissioner Gunther Oettinger said that he is unsure whether Brexit talks will be able to follow the schedule.
Alexander Stubb, former prime minister of Finland, said on Twitter, “(It) looks like we might need a time-out in the Brexit negotiations. Time for everyone to regroup.”
The European Commission, which negotiates Brexit on behalf of the 27 other countries, hadn’t yet reacted to the outcome of the British vote by 8:00 a.m. London time.
David Davis, who has been the U.K.’s secretary of state for Exiting the EU, told Sky News at around 2 a.m. London time Friday that the U.K. government may had lost its mandate to leave the EU and the single market – a tariff-free trading bloc for EU members.
He described Brexit as a process that “seeks to give the best deal in terms of economic and commercial opportunity with Europe but also open up opportunity with the rest of the world.”
The future of the U.K. in Europe has reached a new peak of uncertainty. With a hung parliament, it is unclear who will lead be negotiating with the EU, although a political editor at the BBC has suggested that Theresa May will look to continue as prime minister and will not resign.
Nigel Farage, one of the main Brexit supporters, said Friday that he might return to frontline politics to ensure that Brexit does happen. He resigned from the leadership of the U.K. Independence Party (UKIP) in the aftermath of the Brexit referendum last June.
“I still think the odds are on we will have some sort of Brexit,” Stubbs from JPMorgan told CNBC over the phone. However he added “that a lot has changed in our negotiating position.”
The hung parliament vote has not given Theresa May the political support she wanted to take the U.K. out of the single market.
Kallum Pickering, senior U.K. economist at Berenberg, said in an email: “Will the U.K. change its mind on Brexit? Maybe but not very likely.”
The Labour Party also aims to deliver Brexit but one in which it retains the benefits of the single market.