Brexit Bulletin: Scuppered

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The dramatic unraveling of a potential Brexit deal during Theresa May’s lunch with European Commission President Jean-Claude Juncker on Monday means she has just days to salvage an agreement – and it only gets harder.

Ireland has publicly signed up to the agreement it thought would be sealed on Monday. That means any concessions to make it more palatable to the Northern Irish party that props up May’s government will clearly be seen as concessions from Dublin. Add to that the fact that London, Scotland and Wales all wanted a piece of what Northern Ireland was getting – the opportunity to keep access to Europe’s single market.

Brexit Bulletin: Scuppered

May needs to win over the Northern Irish DUP in days before heading back to Brussels this week for another try. May and Juncker both said they were confident a deal could be reached in time for a summit of EU leaders in mid-December to give the green light for trade talks to start next year.

It's impossible to square what the DUP wants – no border with mainland Britain – with Dublin's demand for no border on the island and the U.K.'s plan to leave the single market that makes the border invisible now. The possible solutions are unacceptable to at least one party in the debate.

The clock is ticking as never before: On Wednesday EU diplomats are set to start drafting the conclusions for the summit and the commission is also due to evaluate progress. On Dec. 11 the representatives of EU leaders sit down to prepare for the leaders’ meeting and on Dec. 12 ministers make any final revisions to the conclusions.

While the U.K. says the real deadline is the summit, the EU has pushed back against any 11th-hour offer. If there's no breakthrough in December, the chances of a messy breakup increase and the voices on the U.K. side calling for a walkout will grow louder.

In any case, it’s not only Northern Ireland that stood in the way of a deal on Monday. The role of the European Court of Justice remains a sticking point, according to people familiar with the situation. It’s taboo for Brexit-backers who see it as a symbol of lost sovereignty, while the European Parliament has made it a red line that its citizens’ rights should be protected by the court.

That’s why British officials continued to play down expectations of an imminent agreement on Monday even after chief EU negotiator Michel Barnier briefed European lawmakers that a deal was imminent. Irish Prime Minister Leo Varadkar was planning a statement to reporters – the lectern had gone up before being hastily put away. Even in London, Conservative lawmakers were summoned to a meeting they thought was about a big announcement. They were then told there was nothing to report from Brussels.  

May chairs a cabinet meeting on Tuesday, and may well find ministers not best pleased with her performance. 

Brexit Latest

Patience Tested | U.K. Plc’s frustration over a lack of Brexit clarity intensified as the breakthrough in talks failed to materialize, with businesses reminding politicians that their planning horizons are rapidly vanishing. “To get on to the trade talks is imperative for us – I’d like to know straight away,” said David Lenehan, managing director of Northern Industrial, a Blackburn-based supplier of spare parts. “We’ve got competitors in Europe who, if they can get parts delivered faster, then it doesn’t really matter about price," he said. "A day or half-a-day delay can be the difference between getting an order and losing an order.”

Us Too | Theresa May’s attempted Brexit concession on Northern Ireland risked further disuniting the U.K. as regional leaders at either end of the country immediately called for similar treatment. Scottish First Minister Nicola Sturgeon and London Mayor Sadiq Khan both tweeted that they would like to stay in the single market, too. Wales soon followed.

Sadiq Khan @SadiqKhan
Huge ramifications for London if Theresa May has conceded that it's possible for part of the UK to remain within th… https://t.co/4ldHBXUS8z
https://twitter.com/SadiqKhan/status/937687376167604225

Grey Friday | U.K. retail sales rebounded last month, fueled by higher food spending. But non-food sales slumped as Black Friday failed to tempt enough British shoppers to open their wallets. The numbers suggest households are still reluctant to spend on non-essentials given the squeeze on budgets as wages lag behind inflation and Brexit creates uncertainty for the economy.

On the Markets |  Even as Brexit talks lurch from one hurdle to another, the pound is enjoying a rising wave of confidence among investors and analysts, writes Bloomberg’s Anooja Debnath. Aberdeen Standard Investments is betting it will rally in 2018 as Brexit talks make better progress than the market expects. It will also benefit from the prospect of interest-rate increases by the Bank of England, according to JPMorgan Asset Management. Strategists at SEB AB and Nomura International Plc also see room for gains.

And Finally...

Jean-Claude Juncker’s attire in Brussels on Monday held a clue as to what he thought the day might bring. Usually a critic of the U.K. and a Brexit hawk, the president of the European Commission had donned a conspicuously British-looking tie for the occasion: a Burberry style beige tartan.

Brexit Bulletin: Scuppered

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To contact the author of this story: Emma Ross-Thomas in London at erossthomas@bloomberg.net.

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