TheChek News Flow

This week everyone will be talking about Gucci's latest sales figures, Nordstrom's big new Manhattan store and the twists and turns of Barneys' bankruptcy. Get your BoF Professional Cheat Sheet.

-> Kering, Moncler and Hermès report quarterly results on Oct. 24

-> Gucci’s pace of growth has slowed markedly this year, and sales dropped in the US in the second quarter following tthe “blackface” balaclava controversy

-> In the first half of the year, Gucci represented about 60 percent of Kering’s revenue

Kering's star brand officially came back to earth last quarter after two years of eye-popping growth. The question is where Gucci heads next, now that it's behaving like a normal, if still highly successful brand. A few factors point to a bright future: Alessandro Michele’s latest show demonstrated an aesthetic pivot that garnered favourable reviews; the brand's crack team of merchandisers will know what to do next. Gucci has also resumed blitzing American consumers with advertising after a brief lull following the blackface controversy. A foray into cosmetics appears to have paid off, with over 1 million tubes of lipstick sold in the line's first month. And the brand has certain items — the belt, for starters — that keep it front and centre with consumers. The biggest hurdle may be the high expectations set by Chief Executive Marco Bizzarri and Michele during their remarkable first few years with the brand; ordinary success can almost seem like a failure after that.

The Bottom Line: Watch how Kering's other major brands perform, particularly Bottega Veneta. With Gucci behaving more like a normal brand, Kering needs to show it's not a one-trick pony more than ever.

Nordstrom opens a seven-storey, 320,000-square-foot location in Midtown Manhattan on Oct. 24, its first full-price women’s store in New York City

The Seattle-based department store chain opened a men’s store in the city last year and two "Nordstrom local" concept stores

Nordstrom's growing online sales are replacing weaker brick-and-mortar revenue

New York has seen unusual turnover in its department store scene. Lord & Taylor closed its flagship, Henri Bendel closed for good and Barneys may soon follow suit (see the next item for more on that). Saks gave its flagship a $250 million facelift and Neiman Marcus arrived in the city, anchoring the massive Hudson Yards mall. Next up is Nordstrom's huge new women's store. The Seattle chain is making a big bet on the future of brick and mortar, but its future may hinge on how well it integrates the online shopping experience. Nordstrom has been particularly aggressive about introducing digital brands to its shoppers and offering features such as online order pickups and returns. The "local" concept goes even further, as those spaces hold no inventory and even accept returns from rival retailers.

The Bottom Line: Nordstrom lacks the international name recognition to draw tourists away from Saks and Bergdorf Goodman. But offering a convenient, omnichannel experience might go a long way toward winning over the locals.

Barneys New York agreed last week to sell its assets to Authentic Brands Group for $271 million

Atrium founder and Kith investor Sam Ben-Avraham has assembled a rival bid backed by fashion and real-estate heavyweights

Bidding ends on Oct. 22. If ABG’s offer wins out, it plans to close stores and liquidate merchandise

What’s the value of the Barneys brand? About $271 million, apparently. ABG’s plan to close Barneys’ remaining seven locations and reportedly relaunch as shop-in-shops inside Saks is an unexpected and, to those with fond memories of the department store’s heyday, tragic twist. On the plus side, the deal would liberate the retailer from its Madison Avenue lease that has crippled its ability to operate on its own, and ABG brands like Juicy Couture are thriving under the licensing model. Ben-Avraham's group, which includes Theory co-founder Andrew Rosen and billionaire investor Ron Burkle, would keep most stores open. He told BoF last week his plan would involve turning Barneys locations into entertainment destinations that appeal to shoppers and non-shoppers alike. What that would look like, and whether this model can reverse Barneys' decade-long slide, remains to be seen.

The Bottom Line: Along with the sale of Lord & Taylor to Le Tote for just $100 million, the fact that Barneys' brand might be its only asset is truly a sign of how far the once-mighty department store model has fallen.

The weakness in company finances is a danger to the rest of the economy

Very high and rising levels of corporate debt in the major economies have been troubling central banks and regulators for several years, but until now there has been little willingness to take direct policy measures to reduce the associated financial risks.

Last week, however, the IMF issued a strong warning that action is “urgently” needed to head off the danger of a financial meltdown in the corporate sector, which could potentially spread into the banking and shadow banking sectors. Policymakers and investors should pay close attention.

Among the three largest economies, the IMF argues, the eurozone is currently the least at risk of a major collapse in its corporate sector, largely because it addressed some of the problems of excess debt after the euro crisis in 2012. In China, these problems would become severe in a recession, but the policy response is already under way.

That leaves the US, where corporate debt continues to rise extremely rapidly and could be stimulated further by the latest interest rate reductions by the Federal Reserve.

I argued in March that this problem was not yet dangerous, but that was probably too complacent.

Although US corporate debt-to-income ratios were already close to all-time peaks, other aspects of company balance sheets and financial flows were in much better shape. Profit margins were still fairly robust, the net financial balance of the corporate sector was in comfortable surplus, interest-to-income ratios were low and debt-to-equity ratios were healthy.

The one major cause for concern was the distribution of debt within the company sector, especially the growth of the $1tn leveraged loan market. 

In the last six months, the condition of US corporate finances has become more worrying. As in other major economies, profit margins have come under increasing downward pressure, because producers’ wage costs have been rising more rapidly than selling prices to the consumer. The Phillips curve relationship between declining unemployment and rising inflation has been working well in the wages sector, but not at all in the prices sector.

The deterioration in profits growth (see box below) has been accompanied by more aggressive corporate financial behaviour, while real capital investment to expand productive capacity has been cut back. According to the IMF stability report, share buybacks, dividends and merger and acquisition activities — financed by leveraged loans and high-yield bonds — have surged in 2019. These activities have spread to small and medium-sized firms, which the IMF says are particularly vulnerable on the profit front.

Taken in isolation from other economic shocks, such corporate financial weaknesses are unlikely to trigger a recession, but they could certainly exacerbate the effects of other contractionary shocks. This is what happened in 2008,when a medium-sized shock in the subprime mortgage market caused an enormous downturn in economic activity. The impact of the trade disputes on business confidence, which has been collapsing in recent months, is the most obvious current threat.

The Federal Reserve and other US regulators have left it rather late to acknowledge these risks. Fortunately, there are some indications that they are now preparing to act.

In a speech on 25 September, Fed governor Lael Brainard said that financial vulnerabilities in the corporate sector have been increasing markedly, and specifically mentioned that the central bank will decide whether to activate its countercyclical capital buffer in November.

This mechanism enables the Fed to require the nation’s largest banks to increase capital buffers against the time when economic stresses emerge.

Following Ms Brainard’s remarks, it would be surprising if the Fed’s annual vote on the buffer in November fails to impose higher capital charges on large banks. That would be a move in the right direction, but it would leave potential problems in the regional banks, and the shadow banking sector, largely untouched.

The Fed needs to show more urgency in these areas, before it is too late.

Chatter at IMF and World Bank meetings focused on trade and economic uncertainty

Publicly, finance ministers and central bank governors have held off on raising fears that a global recession is coming — but in private, international and national officials are not nearly so certain.

The communiqué issued at the end of the IMF and the World Bank’s annual meetings in Washington this week agreed that the global economy is not slipping into recession. But as policymakers and economists gathered in the bustling corridors of the buildings surrounding 19th Street in Washington, the worry was that the forecast of an improving global outlook next year could, at any moment, be punctured by a tweet from the White House.

That would turn the IMF’s relatively sober forecast that 3 per cent global growth this year will rise to 3.4 per cent in 2020 into something much uglier.

Kristalina Georgieva, the IMF’s new managing director, captured the concerns when she said the chill in the Washington air reminded her of an “unfortunately appropriate” line from the Russian poet Alexander Pushkin.

“The breath of autumn begins to ice the roadway,” she said.

The IMF broadly defines a world recession as growth slipping below 2.5 per cent a year. This is still far from the fund’s base case. Although the global economy is experiencing its weakest performance since the financial crisis — because trade wars have knocked confidence, investment, trade and manufacturing — the IMF expects a pick-up next year.

Highly stressed economies are unlikely to suffer the same fate in 2020 as they have this year, and the large emerging economies of Mexico, Brazil and Russia are likely to do a bit better, the IMF believes. But it did not forecast any improvement in the “big four” global economies — China, the US, the eurozone and Japan.

On the sidelines of the meetings, the mood was gloomier. The IMF’s forecast could easily be knocked off course by further tit-for-tat trade disputes — perhaps quite soon if the Trump administration imposes tariffs on European automobiles.

Erik Nielsen, chief economist of UniCredit, predicts a global recession in 2020.

“Our difference with the IMF baseline is that we assume [trade] policies will not improve,” he said.

His concern, shared by many officials, is that any further rounds in the trade wars would confront policymakers with the unpalatable prospect of attempting to counter recessionary forces with a nearly-empty toolbox.

Pinelopi Goldberg, the World Bank’s chief economist, came closest to articulating these fears in public.

“Policy is supposed to remove instability, instead it is suppressing old certainties. No one knows what tomorrow will bring,” she said.

Policymakers were relieved at the recent truce between the US and China on trade, but have little confidence that it will last — a sentiment Ms Georgieva captured by calling for the countries to move towards a more durable “trade peace”.

Meanwhile, European officials are growing increasingly anxious about the prospect of an all-out transatlantic trade war as tensions with the US mount over aircraft subsidies, car tariffs and digital taxation.

“Do you really think that opening a trade war between the US and the EU is the best political signal that we can send to the rest of the world,” Bruno Le Maire, France’s finance minister, asked ahead of a meeting with Robert Lighthizer, US trade representative.

One reason for optimism is that the problems remain concentrated in manufacturing and trade, while services, household incomes and jobs are still strong.

Adam Posen, president of the Peterson Institute for International Economics, cautioned that it was too early to say a recession was likely. It would be easy to say “protectionist, backward trade policies will immediately mess you up, but we’ve been careful not to say that because it’s probably not true”, he said.

But almost everyone at this week’s gathering accepted that the slowdown was serious and the unusual divergence between manufacturing and services was unlikely to last.

Gita Gopinath, IMF chief economist, said she was concerned about “whether and when weakness in manufacturing may spill over into the services sector” and noted that new orders were softening in the US, Germany and Japan.

Attention focused on what policymakers could do to counter a new global downturn.

Few were in any doubt that the Federal Reserve would continue cutting interest rates, but monetary policy is unlikely to be effective in Europe and Japan — where interest rates are either at zero or close to it — so the fear is that the world could sink into a possible recession without any lifeboats.

Worse, the IMF warned that companies and parts of the financial sector had taken on very large quantities of debt, which might amplify a downturn.

All eyes are on how much fiscal policy could do. The IMF called on Germany to take advantage of its ability to borrow at negative interest rates; fiscal policy would have to act decisively elsewhere too, it added.

The fund’s next major update to its outlook, published next April, will look at how the world can deal with a recession with rates at rock bottom.

The IMF’s membership, however, took only a small step towards expanding its own resources.

It agreed to discuss doubling a second-line borrowing facility to maintain its funding at about $1tn over the coming years, but the US opposed an increase in IMF quotas because it would have boosted China’s voting power in the institution.

If the synchronised slowdown does lead to a more serious global recession, policymakers must hope this limited measure will give them sufficient firepower to fight any resulting crises.

Prices tumble after steep decline in demand for hog feed

The rapid spread of African swine fever has taken its toll on companies operating in China’s corn sector, where prices have plummeted after a sharp fall in demand for hog feed, the primary use of the crop.

Prices of one-month corn futures on the Dalian Commodity Exchange have lost 10 per cent to Rmb1,859 per tonne since May.

The decline shows that the effects of African swine fever, which is incurable and has triggered mass culls in China, are rippling into other sectors that rely heavily on pig farming.

Almost a third of China’s annual output of corn is used in hog feed, according to Sublime China Information, a commodity consultancy, but the pig population has fallen 41 per cent since the epidemic began last August, hitting demand.

“Pig feed consumption could remain weak in the months or even years to come,” said Zou Jun, an analyst at SCI, which estimates that swine fever will reduce the country’s corn consumption by 40m tonnes in 2019.

Official statistics show the nation’s hog feed output fell 14 per cent in the first half of this year, and that pig herds dropped just over a quarter in the same period.

In the northern province of Liaoning, Liujia Tongfeng Grain Trading Co, a corn trader, reported a more than 50 per cent drop in orders from pig feed factories this year following an escalation of swine fever in central provinces, known for their hog farming industry.

“Swine fever is having a larger-than-expected impact on our business,” said Liu Hanrong, general manager of Liujia Tongfeng.

Animal feed plants have also reported a dramatic reduction in demand. Lei Kejin, general manager at Shunxing Animal Feed Co in the central province of Jiangxi, said monthly sales of pig feed had fallen to fewer than 2,000 tonnes from a monthly average of 13,000 tonnes before swine fever kicked in.

“How could we keep production on hold, or only slightly lower, when 90 per cent of pigs are gone?” said Mr Lei, adding that he doubted official statistics on the epidemic. “Official statistics are very different from reality.”

Official calls from feed suppliers to rebuild decimated herds of pigs have had little impact because farmers, aware that swine fever outbreaks have been widespread in China, fear the disease will strike again.

Many corn traders hope that poultry feed, another major use of the crop, will pick up the slack. With pork prices in major cities 84 per cent higher compared with a year ago, Chinese consumers are turning to chicken, boosting poultry farms and offering hope for corn feed suppliers.

As chicken prices have shot up on strong demand, farmers have raced to increase their stock. Mr Lei, of Shunxing Animal Feed, has recently purchased 80,000 fast-growing baby chickens in the hope of making “a quick buck” when his herd matures in two months. The result is a 11.5 per cent jump in China’s poultry feed production in the first six months of this year compared with the same period last year.

However, animal feed factories say the increase in poultry feed output is not enough to offset the decline in demand for hog feed.

Liu Chunlin, general manager of another animal feed factory in Jiangxi, said what a pig eats in its lifetime is enough to feed up to 30 chickens. That means China’s chicken herd must grow at “an unreasonably fast” pace to make up for the huge losses in hog population.

“I can’t think of anything big enough to stop corn consumption from sliding,” said Mr Liu.

The French capital attracts UK-based workers concerned about Brexit fallout

Michel has lived in London for two decades. This spring, the French banker and consultant bought a flat on the Left Bank of the Seine. While he has no immediate plans to move, Michel says his British wife pushed him to move their finances away from the UK, fearing the fallout from a no-deal Brexit.

So far, the total number of job moves out of London has been a fraction of that predicted. According to a report from EY last month, banks have moved only about 1,000 positions from London to other parts of the EU since the 2016 referendum — in stark contrast to the tens of thousands of losses that some had forecast.

Still, Michel is one of a growing number of London-based bankers eyeing up Parisian property, agents report. Most are “looking for extra security as a medium-term measure”, says Hugues de La Morandière, chief executive of Agence Varenne.

His buyers are looking for a pied-à-terre in the French capital in anticipation of a larger purchase further down the line. David Scheffler, chief executive of Engel & Völkers in France, says his agency has seen interest in Paris from London-based buyers jump 20 per cent in a year.

The number of ultra high net worth individuals living in the French capital has increased sharply, according to Wealth-X, a research company that tracks the activities of the super-rich. Wealthy buyers have been attracted by President Emmanuel Macron’s policies — his administration has cut the country’s wealth tax on everything apart from property assets and introduced a flat capital gains tax of 30 per cent.

“London has long been the number one destination for international business people looking to buy a property in Europe, but that seems to be changing,” says François-Xavier de Vial, director of Home Hunts, a buying agency. He claims to have seen increased interest in Paris from Middle Eastern, Russian and Chinese buyers.

In the year to June, the value of Paris’s prime properties — the top 5-10 per cent of homes by value — had increased by nearly 8 per cent, according to Savills research. Over the same period, the average property price in Paris grew by more than 6 per cent.

In contrast, London’s property market has been falling: prime homes are down 11 per cent since the 2016 referendum, according to Savills; with the average price dropping 3 per cent over the same period, according to Nationwide. The state of the market — coupled with the fall in sterling — has held some London-based buyers back from buying in Paris, agents say. “Leaving a slowing market and entering a more expensive one is not easy,” says de La Morandière.

The wealthiest buyers tend to look in the sixth and seventh arrondissements, says de Vial. The price per sq metre of property in the sixth is €13,880, up 10.2 per cent since last year, according to research by Knight Frank. The average price per sq m across Paris broke through €10,000 this year. In Saint-Thomas-d’Aquin on the Left Bank, E&V is selling a four-bedroom flat for €3.2m. Emile Garcin is advertising a four-bedroom flat overlooking a 17th-century courtyard for €4.45m.

In the five years leading up to 2016, Paris was losing about 12,000 residents annually, according to the Insee, France’s national statistical body. Kelly Simon, co-founder of Paris Je Te Quitte, a website advising Parisians on moving out of the capital, says many first come to Paris as students or young professionals but, when they want to have a family, they find the financial pressures are too high.

To help stem the flow of Parisians outside the Périphérique, Paris brought in new rent controls in July — the first French city to do so. Rents cannot now exceed a reference rate — calculated according to a building’s location, type and date of construction — by more than 20 per cent.

Like many of those buying a pied-à-terre, Michel rents out his Left Bank flat on a short-term basis — under French law it can quickly be reclaimed if he decides to relocate to Paris.

Politics will dictate if he does make the move across the Channel, but one thing is sure: “Traditionally, the UK has been the place of exile for French liberals,” he says mournfully. “No longer.”

Buying guide

The fastest-growing arrondissement last year was the gentrifying 19th, where prices rose 13.8 per cent in a year

Parisian property is still a third cheaper than central London, according to Engel & Völkers

The population of the French capital fell 2.6 per cent in the five years to 2016

What you can buy for . . .

€900,000 A two-bedroom 1930s flat in the 16th arrondissement

€1.4m A three-bedroom flat in the fashionable Marais

€2.8m A two-bedroom flat in the triangle d’or, close to Avenue Montaigne

* Cover story: As new players enter the streaming media business, consumers are going to face a “bewildering sprawl of choices”; These companies will need to win customers quickly if cord-cutting accelerates among traditional cable customers, because if viewers stick with bundles, streaming companies could end up overspending; For now, even media bosses don’t know how things will play out as CMCSA, NFLX, DIS, T, CBS, VIAB, ROKU, AMZN, AAPL, and GOOGL battle it out.

* Tech Trader: Enterprise tech has been a hot area for investors in recent years, but the theme works only as long as corporate buyers are paying up for the technology, which is no longer a sure thing—tech purchases are closely tied to business confidence, and worsening sentiment could spark a negative feedback loop where perception becomes reality.

* Trader: Low-volatility stocks, perceived by some as the market’s safest, continue to outperform, says Chris Harvey of Wells Fargo Securities, while investors remain positioned for lower interest rates and a possible global slowdown; Cautious on EMR: Activist investor D.E. Shaw is pushing for change at the company, claiming tighter cost controls, better governance, and splitting the company in two could boost the stock, but many analysts think Shaw’s cost targets are too aggressive; Health care isn’t just cheap, it’s the second-cheapest S&P sector, and if the economy holds up, it has enough risky stocks, particularly in biotech, to benefit if the market moves higher.

Wulf Matthias calls discussion of payment group’s accounting ‘an annoyance’

Wirecard’s chairman Wulf Matthias has dismissed calls for an independent forensic audit of the German fintech group’s accounts, at the end of a week which saw its market value drop by more than a fifth.

Mr Matthias said the group’s accountants appeared to be acting properly. “Prima facie, EY is evaluating the matters sufficiently,” Mr Matthias told the Financial Times.

Wirecard has faced growing calls for an independent review of work by its auditor, EY, after the FT published documents on Tuesday that appeared to indicate a concerted effort to fraudulently inflate sales and profits. The company has categorically denied impropriety and said the conclusions drawn by the FT about the files were incorrect. 

The 74-year-old — a former senior banker at Credit Suisse in Germany and other lenders — called the public discussion about Wirecard’s potential accounting issues “an annoyance”, adding that “we have endless stories [about Wirecard], three a day. I have not looked at them in further detail. We have other things to do.” Mr Matthias is due to step down as chairman of the supervisory board next year. 

The comments came after Wirecard’s shares came under fresh pressure following an anonymous public letter to the group’s supervisory board members, warning them they could potentially face personal liability if they failed to investigate credible allegations of fraud.

The letter was posted Friday on a website, MCA Mathematik, which unidentified short sellers have used in recent months to publish analysis of Wirecard’s financial statements and management commentary. 

The FT could not immediately reach the five other members of Wirecard’s supervisory board for comment. 

Wirecard’s shares dropped 6.3 per cent on Friday, to €111.65, taking the fall for the week to 21 per cent, despite the company announcing a €200m share buyback. 

EY has declined to comment on its work for Wirecard, citing client confidentiality. In a statement published on Wednesday, Wirecard said “Wirecard’s group auditor Ernst & Young GmbH, Germany, confirmed that they have complied and will comply with all statutory and professional audit standards.” 

Wirecard faced scrutiny this year as an accounting scandal unfolded in Singapore, where white-collar crime investigators are probing alleged accounting fraud and forgery. 

After initially denying FT reports that the head of its finance team in the region was suspected of cooking the books at subsidiaries in the region, Wirecard admitted that some employees may face criminal liability, and announced a dozen new compliance measures. The company has said there was no material impact on its financial statements, and EY signed off on the group’s accounts for 2018.

Lawmakers to get a further chance to vote on a deal next week

LONDON—British lawmakers voted Saturday to postpone a decisive Brexit vote, likely forcing Prime Minister Boris Johnson to request a further delay of the U.K.’s departure from the European Union.

Parliament said it needed more time to review a deal Mr. Johnson concluded this week with European leaders that sets out citizens’ rights, a financial settlement to the EU and a special arrangement for Northern Ireland that would require customs checks on goods arriving there from elsewhere in the U.K.

The move was backed by opposition lawmakers, along with some who have recently left or have been expelled from the ruling Conservative Party. By law, failure to ratify a Brexit deal by the end of Saturday requires the government to seek a three-month extension of the current Oct. 31 deadline for Brexit, potentially pushing back a departure from the bloc that has already been postponed twice.

The legislature was set to resume debate on the agreement next week, when the government will give lawmakers a further chance to vote on a deal possibly as early as Tuesday.

If lawmakers approve the deal then, it would also undergo further subsequent scrutiny from lawmakers with the possibility that important amendments could still be passed, including one that would require to deal to be put to a second referendum.

If Parliament doesn’t ratify the agreement, the Brexit process would again be plunged into uncertainty, with an election or referendum likely needed to resolve the stalemate.

The passage of an amendment that forces the government to give lawmakers more time to scrutinize the deal gave few clues to the eventual chances for the deal when it does come to the House of Commons. A key anti-EU group of Conservative lawmakers said Sunday they would support the agreement, increasing its eventual chances of passage.

The amendment, presented by former Conservative Party lawmaker Oliver Letwin, states that the divorce deal only goes into effect once a swath of related Brexit legislation is passed through the lower house. The resulting extension request represents a setback for Mr. Johnson, who had repeatedly said he wouldn’t make such a demand.

Before the amendment was passed in an emergency session Saturday, lawmakers argued they wouldn’t have time to examine the small print of the agreement, which runs to more than 500 pages, and some complained there had been no assessment of its economic consequences.

Government officials said that if lawmakers voted to back Mr. Letwin’s plan, Conservatives would be told that any vote taking place on the deal Saturday was meaningless and to abstain. Mr. Johnson said Mr. Letwin’s suggestion “is an impediment to such a verdict tonight.”

Mr. Johnson, whose ability to control Parliament is significantly restricted by the fact his government is in a minority, had urged lawmakers to back the revised withdrawal deal he negotiated with the EU.

“Now is the time for this great House of Commons to come together and bring the country together today,” Mr. Johnson said. He said the deal provides “a real Brexit” that would be “the greatest single restoration of national sovereignty in parliamentary history.”

Jeremy Corbyn, leader of the main opposition Labour Party, said Mr. Johnson’s administration was seeking to “avoid scrutiny” of the new withdrawal deal, which he said was worse than the package negotiated by Mr. Johnson’s predecessor, Theresa May. He repeated Labour’s call for a second referendum to put any Brexit deal to voters alongside the choice of staying in the EU.

The prospect of Parliament enforcing another delay reprises a familiar theme in Britain’s long-running Brexit saga. Government efforts to railroad Parliament into supporting its Brexit plans have repeatedly been rebuffed by a legislature that cherishes its independence.

Following a delay, the immediate focus would turn to whether the EU grants such an extension.

EU diplomats have tentatively scheduled a meeting on Sunday to discuss any extension request, and officials say they are unlikely to deny it. EU governments could offer a shorter or longer extension than three months, which the government would be compelled to accept under the law. In any case, the extension could be shortened if the U.K. Parliament has agreed on the deal.

Mr. Johnson’s strategy has been to keep the Oct. 31 deadline alive in order to present lawmakers with the option of backing his deal or exiting without one, an outcome many fear would cause economic havoc.

“That’s the Holy Grail of Brexit: Present Parliament with a binary choice that is inescapable,” said Anand Menon, professor of politics at King’s College London. Saturday’s amendment is aimed at changing that calculus and giving Parliament more time to scrutinize the new deal, he added.

Lawmakers in opposition parties worried that passing a deal counterintuitively opened an avenue for Brexit crashing out of the European Union without a deal on Oct. 31 by mistake. The reasoning: If a deal is approved, a swath of legislation needs to be passed to turn that decision into law. If that legislation wasn’t completed by Oct. 31, Britain would leave the EU without a legally binding divorce deal.

As lawmakers debated in Parliament, thousands of people gathered nearby to show their support for or opposition to leaving the bloc.

Stuart Holmes, a retired 72-year-old Londoner, paced back and forth through the green near the House of Commons, holding a sign reading, “Leave then negotiate.” He said three years of back and forth since the referendum has been too much.

“If we don’t honor that, where does it end?” he said.

Across the lawn, a group of women sat under a statute of Mahatma Ghandi, with flags for the U.K. and EU draped across their laps. Lindsay Kitson, 66, said she was attending her second Brexit protest in central London. “It’s to tell our grandchildren that we stood up for their future,” she said.