Endgame in sight despite government chaos, says Ian Taylor

Business leaders may be tearing their hair out over Brexit, but aspects of the endgame appear clearer following this week’s knockout blow to the government in Parliament.

May suffered the heaviest defeat of any prime minister in history. Its scale went beyond all predictions, with fewer than one in three MPs supporting her deal with the EU.

The business newspaper the Financial Times saw it as “a monumental humiliation”, “a staggering repudiation”, “an utter collapse”.

Yet May remains prime minister after members of her own party and the Northern Ireland Loyalists of the DUP rallied to her.

A ‘softer’ Brexit is now on the cards, even perhaps no Brexit, despite May’s survival.

No deal has become less likely because May needs an outcome most MPs will support and all bar a hardcore of 80-100 Brexiteers out of 650 MPs oppose no deal.

The prime minister must return to Parliament on Monday with new proposals, being compelled to do so after losing a vote the previous week.

She cannot proceed without sufficient support among MPs and the only changes likely to be acceptable are those which would soften the deal.

Heading for delay

Not only will Parliament have a decisive say in a deal, but we are moving inexorably towards a delay in Britain’s exit date of March 29.

The Financial Times reported this week: “Hardly a diplomat left working on Brexit believes March 29 will be Britain’s departure day.”

It noted: “Martin Selmayr, the commission’s top civil servant, began exploring legal avenues to prolong the process” over Christmas, in part “because May’s negotiators privately made clear that . . . Britain would be unable to pass all the ratification legislation required before the end of March.

“Both sides expect to extend the date even in a no-deal scenario . . . The question is not if but when Britain asks for an extension.”

One senior EU official told the newspaper: “If May asks for one, she gets one.” It reported: “EU leaders are likely to approve an extension until July 1.”

However, there are EU elections in May, with a new European Parliament due to hold its first session in July. For that reason, some EU officials want an extension limited to July 1. Others “see merit in a longer extension”.

The most plausible outcome now may be for the UK to remain in a customs union with the EU. This is the preferred option of the Labour leadership.

The so-called ‘Norway Plus’ option of a customs union and membership of the single market is preferred by other senior Labour figures hostile to the leadership.

But all options will require that Brexit is delayed. An extension of Article 50 can’t be avoided. May, herself, hinted at a delay to the leaving date this week.

Prospects of an election

After this it is likely Britain’s relationship with the EU will remain close to what is today, albeit without the UK playing a role in EU decision making.

The price will be an open split in the Conservative Party, which for now May continues to seek to avoid.

The UK could even remain in the EU if the way is cleared to a second referendum, although this still appears less likely than a general election.

Several senior Tories raised the prospect of an election this week, including former Conservative leader William Hague and former chancellor George Osborne through the vehicle of the London Evening Standard which he now edits.

An unnamed cabinet member said: “Chaos will eventually lead to a general election.”

Of course, an election could also return a hung Parliament and resolve nothing.

There is momentum behind the demand for second referendum, not least among Corbyn supporters, business leaders and former backers of ‘New Labour’ as well as the Scottish Nationalists and Liberal Democrats.

But a second referendum is opposed by most Tories and would require the backing of Labour leaders, who would prefer an election.

It is also opposed by some senior Labour figures who oppose Corbyn, who understand it could drive a wedge between many Labour voters and party members.

The die is cast

If crashing out of the EU on March 29 is unlikely, why keep talking about it?

May hesitates to seek a postponement because she still hopes to hold the Tory Party together and wishes to retain the threat of no deal with the pressure of an impending deadline.

Even now May appears committed to “an independent trade policy” for Britain which would rule out a permanent customs union because conceding on that would split her party.

A Norway-style single market deal would mean free movement of people which remains a ‘red line’ for May for the same reason.

But something will have to give and it will be a majority in Parliament which decides what it is.

Chancellor Philip Hammond told business leaders this week that a no-deal Brexit would be blocked because: “There is a large majority in the Commons opposed to no deal.”

A fellow cabinet member explained May wishes to retain the prospect of no deal solely “for negotiation purposes”.

And one Brexit-supporting minister told the Financial Times: “We are heading for a permanent customs union and a split in the party.”

It would be irresponsible for any business not to have plans in place for no deal and for the March 29 deadline. Both remain possible. But the die is cast.