Brexit’s Tortured Endgame as the Deadline Pushes Out: QuickTake

Apr 12 2019, 12:43 PMApr 12 2019, 2:35 PMApril 12 2019, 12:43 PMApril 12 2019, 2:35 PM

(Bloomberg) -- Brexit day came and went on March 29 and the U.K. is still in the European Union. The drawn-out saga of Britain’s departure from the bloc was thrown into disarray by the U.K. Parliament’s repeated rejection of the divorce deal negotiated by Prime Minister Theresa May. Exasperated EU leaders granted the U.K. another extension to Oct. 31 to provide more time for Britain to work out its domestic politics. That has postponed the risk of a disruptive no-deal departure, and opens a path to redefining Brexit or even abandoning it altogether.

1. Where’s this drama going?

It’s hard to say. The embattled premier is trying new tactics to get her troubled Brexit plan through the House of Commons, including offering to resign if the deal is approved and reaching across the aisle for talks with the opposition Labour Party. The repeated delays to the EU exit date have sparked more calls for May to quit, and there’s also a growing sense that a general election might be needed to break the impasse. The next chapter in the drama might be a fight inside May’s Conservative Party over who will succeed her.

2. How long can this go on?

EU leaders granted May a second Brexit extension on April 10, though the U.K. could leave the bloc earlier than the new deadline if Parliament can agree on a deal. The postponement means Britain is now preparing to participate in elections for the European Parliament, scheduled for May 23 to 26. May says holding that vote three years after Britons decided to leave the bloc sends a terrible signal, so she’s hoping to reach an agreement soon enough that the U.K won’t have to take part. The elections will be a proxy for a second referendum on EU membership. Nigel Farage, one of the architects of the first Brexit campaign, has returned to front-line politics with a new party to fight for a clean split with the bloc.

3. Can the whole thing be called off?

Yes, and the delay could make that more likely. But there are still major obstacles. At least for now, there isn’t a majority in Parliament behind proposals to hold a second referendum. Jeremy Corbyn, leader of the opposition Labour Party, has come out in favor of a second vote, but with reservations. May says it would undermine faith in democracy and could rip the country apart. Some lawmakers want any Brexit deal that’s reached with the EU to be put to a public vote, another possible avenue to calling off Brexit altogether. In any case, it’s not clear what the result would be: Polls indicate that support among voters is now more in favor of remaining in the EU than leaving, but that’s what surveys showed last time, too. Leave ended up carrying the 2016 referendum with 52 percent of the vote.

4. What’s the way forward?

It’s not clear. By the third time May’s deal was defeated by Parliament on March 29, some Brexit hardliners in her own party had been convinced to support her. But the plan still failed by 58 votes. Some lawmakers had tried to force the government into maintaining closer ties with the EU, in a so-called soft Brexit. The Labour party is still pushing for a form of a “customs union,” which would keep goods in European supply chains moving tariff-free. May has hinted that she’d be prepared to consider that, even though it would split her party. Though lawmakers held a series of non-binding “indicative” votes on various proposals, none won the support of a majority. Lawmakers did, however, vote to block the government from pursuing a so-called no-deal Brexit.

5. Could the U.K. still leave without a deal?

There’s still a chance Britain could crash out of the bloc with no agreement or grace period, though the EU has made clear it doesn’t have the stomach for it. May has said she wouldn’t lead the country out without a deal unless Parliament agreed. A pro-Brexit successor to May might, however. That would leave the U.K. lacking legal arrangements to smooth trade and other transactions with its neighbors, snarling cross-border commerce. Bottlenecks could bring shortages of everything from food to drugs to manufacturing components. Both sides are preparing for the worst, for example taking steps to prevent a financial-markets meltdown. But while the measures can mitigate some of the more catastrophic outcomes -- such as flights being grounded -- they won’t address the obstacles to trade that would suddenly emerge.

6. What’s the fallout?

Companies operating in Britain have bemoaned the lack of clarity over Brexit’s impact, warning that unanswered questions about everything from trade policy to immigration laws are throttling hiring and investment decisions. The prospect of Brexit has already prompted global banks to move operations, assets and people to Frankfurt, Paris and other cities. Manufacturers and broadcasters have also started moving facilities, while companies and households have been stockpiling.

7. Why did May’s deal fail?

She faced opposition on all sides: from the pro-Brexit and pro-EU flanks of her Conservative Party, from the Northern Irish party that props up her government and from most of the opposition Labour Party, which wants to maintain trading ties to protect jobs. The main objection was from her own Tories and Northern Ireland’s Democratic Unionist Party to guarantees to ensure that a new physical border wouldn’t emerge between Northern Ireland, which is part of the U.K., and the Republic of Ireland, which will remain in the EU. Critics say this so-called backstop provision risks binding the U.K. to EU rules forever. They argue that May caved in to the EU and betrayed the electorate’s call to regain sovereignty, while treating Northern Ireland differently to the rest of the country.

8. What did the divorce deal say about future ties?

Alongside May’s proposed divorce treaty is a non-binding political declaration on what future ties between Britain and the bloc should look like. It is vaguely worded, an intentional move designed to help May get the deal through a divided Parliament. But that vagueness became a liability as lawmakers complained May was asking them to sign off on a “blind Brexit” -- a departure from the EU without a clear sense of what the future would hold. A permanent deal on economic and trading ties was meant to be thrashed out during the 21-month transition that was intended to start the day Britain left. That political declaration could be tweaked if talks with the Labour Party produce a new consensus.