Brexit Bulletin: Lording It Over Theresa May

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(Bloomberg) -- Today in Brexit: The House of Lords is poised to inflict a defeat on Theresa May today over Brexit, which could embolden the House of Commons to push for a softer split.

Parliament’s campaign to rewrite Prime Minister Theresa May’s Brexit policy is set for a victory on Wednesday as the House of Lords votes on a piece of key legislation.

An amendment that seeks to keep the U.K. in the European Union’s customs union will probably pass by more than 50 votes as Lords from all parties back it, Alex Morales reports. If that happens, the lower house can either vote to retain it or throw it out.

The trouble for May is that there is probably also a majority in the lower house for staying in the customs union – an arrangement that businesses are eager to keep because it makes cross-border trade easier. The opposition Labour Party also backs a customs union and there are parts of May’s government that feel the same way. But if May accepts staying in the customs union, she risks a leadership challenge and a crisis in her party: Hardline supporters of Brexit would see it as a betrayal of the project. They want to leave the customs union so Britain can run its own independent trade policy.

There’s already another amendment to a separate bill in the House of Commons that calls for a customs union, and the government has postponed discussion of that legislation. Critics say they put it off because they don’t think they can win. At least 10 rebel Conservatives back the amendment.

Wednesday marks the first of six sessions in the Lords for the bill between now and May 8. The measure isn’t likely to return to the Commons until the second half of May, though no formal date has been set.

The EU is watching with interest. Staying in the customs union would go a long way to solving the issue of the Irish border. The EU wants a solution on Ireland by June, when there’s a leaders’ summit, and the EU has penciled in a discussion on whether the U.K. has altered any of its negotiating red lines. If it has, suddenly the negotiation about the future trading relationship becomes a lot simpler.

Today’s Must-Reads

  • The City of London’s fight to remain a financial hub hinges on some in-the-weeds talks with regulators as much as on political negotiations. Read about the key battlegrounds.
  • U.K. workers are enjoying the strongest wage growth in almost three years, but it’s unlikely to bring any kind of spending splurge.

Brexit in Brief

Trade Talk | Negotiators will sit down today for the first time officially to talk about the future EU-U.K. trading relationship. Remember that EU officials have said they don’t expect serious talks to get going until June because the Irish border issue remains an obstruction.

Scottish Obstacle | The Supreme Court will look at legislation passed in the Scottish Parliament and Welsh Assembly that aims to make sure that powers that return from the EU will go to devolved administrations rather than to the central government. The U.K. government hopes the court will rule the laws unconstitutional. It’s part of a bigger fight between the devolved administrations and May that threatens to complicate the exit process, and there’s a separate question over whether those administrations can block the government’s landmark Brexit legislation.

Iceland Reconsiders | Brexit is prompting a rethink of European ties in Iceland, Ragnhildur Sigurdardottir reports. The country is looking at the potential impact on trade posed by the U.K.’s departure, as well as the scope for Iceland to have a greater say in European Economic Area decisions. According to a recent study by Nordic academics, Brexit poses a particular challenge for small countries such as Denmark and Iceland, which have been relying on Britain to defend free trade and counter what they call France and Germany’s “cooperative hegemony over Europe.”

Emergency Powers | The European Commission is preparing for a no-deal scenario with a raft of legislation that would give EU institutions emergency powers, the Financial Times reports. The preparations are for a no-deal either in March 2019, the scheduled departure date, or at the end of the transition period, the paper says.

Windrush Fallout | The government’s handling of the so-called Windrush crisis raises concerns for EU citizens in Britain after Brexit, the European Parliament’s Brexit coordinator Guy Verhofstadt said, according to the Telegraph. The government has apologized for wrongfully deporting people who came to the U.K. legally from Caribbean former colonies but were left without documentation to prove their status.

Coming Up | Labour Brexit spokesman Keir Starmer speaks at 8:30 a.m., Prime Minister’s Questions occur at noon and Environment Secretary Michael Gove takes questions from lawmakers at 2 p.m. House of Lords voting is in the afternoon to early evening.

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