Brexit Bulletin: Cornered

(Bloomberg) -- Today in Brexit: Theresa May will again push to get her deal through Parliament, but her position is weaker than ever.

Prime Minister Theresa May will today take her Brexit deal back to the House of Commons, just hours after suffering the latest in a long line of defeats. More may lie ahead.

The premier has five working days to overcome political opposition to the exit agreement she has negotiated with the European Union. The accord goes to Parliament on Jan. 15. But, as Bloomberg’s Robert Hutton and Tim Ross report, her position could now be weaker than ever, after lawmakers on Tuesday acted to undermine her threat of an explosive no-deal exit if the pact is rejected.

The House of Commons voted 303 to 296 to restrict the prime minister’s tax-varying powers if Britain crashes out without an agreement, the latest sign that lawmakers are stepping up efforts to thwart talk of such an outcome. While May’s officials were privately dismissive of the importance of the tax measure itself, it will be harder to brush aside the rebellion of 20 Conservatives — including six former cabinet ministers — who took a stand against leaving with no agreement in place. 

The Bank of England, economists and business groups have all warned against the dangers posed by a no-deal exit, and Tuesday’s vote suggests British politicians are ready to keep that from happening. Those voting against the government included the usually loyal Tory Oliver Letwin, who later warned that he would continue to rebel “right up to the end of March” to make it more difficult for ministers to implement no-deal contingencies.

At an earlier Cabinet meeting, there were also signs that the top of the Conservative Party is losing patience with members pushing for an exit without rules. According to two people familiar with the discussions, Tuesday’s talks were mostly focused on planning for such a situation, but the mood was that this would be a very bad outcome. Work and Pensions Secretary Amber Rudd said history would take a dim view of a Cabinet that pressed ahead with that scenario. Earlier, Business Secretary Greg Clark told the House of Commons that “no-deal should not be contemplated” because of the disruption it would cause to time-sensitive supply chains.

Still, there are precious few signs that any Brexit outcome can secure the backing of a majority of lawmakers, with the prime minister looking set to lose next week’s crucial vote.

At Tuesday’s meeting of ministers, May indicated that while she’s doing everything possible to win, she would “move quickly” if the Commons rejects her accord. It’s not clear what the prime minister has in mind, but she would be likely to make a statement to Parliament setting out her next steps as soon as the result is clear. That could include returning to Brussels to seek more concessions from the EU.

Today’s Must-Reads

• Few countries are as worried about the prospect of a disorderly exit as Japan, meaning Prime Minister Shinzo Abe likely will publicly back May’s Brexit proposal when he visits the U.K. later this week, Bloomberg’s Isabel Reynolds reports. 
• Rather than prevent a no-deal exit, Tuesday’s vote in Parliament could make such an outcome more chaotic, according to the Telegraph’s Asa Bennett.
• The EU has warned IAG, the owner of British Airways and Iberia, that its plans to continue flying freely in and around Europe in the event of a no-agreement Brexit don’t work, the Financial Times reports.

Brexit in Brief

Cold Shoulder | The prime minister was met with a frosty reception at a cross-party meeting on Tuesday of more than 200 members who oppose a no-deal departure. “It’s all too little, too late,” Labour’s Ben Bradshaw told reporters. “If she wanted to build a consensus, she should have started two-and-a-half years ago.”

Extra Scope | The European Council may allow Ireland, Cyprus and Spain to negotiate bilateral agreements with the U.K., “on a duly justified request,” documents obtained by Bloomberg show. The countries must show such deals are necessary for “proper functioning” of protocols on Ireland and Northern Ireland and U.K. bases in Cyprus and Gibraltar, according to the documents.

Worries at the Till | Brexit jitters held back U.K. spending on groceries this Christmas, with the Morrisons supermarket chain warning that the current political stalemate is alarming consumers. Discount grocers saw the best performance. 

BT Battle | Phone company BT is at risk of losing millions of pounds of EU contracts after Brexit, the Guardian reports, citing a recent meeting of EU officials and senior European Parliament members.

On the Markets | A gauge of short-term positioning shows investors are the most bullish on the pound in a year, Bloomberg’s Vassilis Karamanis reports. That means the market’s view of sterling could be starting to improve before next week’s parliamentary vote. The respite may be limited: A Nomura survey published Tuesday showed expectations for a 2 percent drop in the currency should May’s deal fail to pass.

Forum Fears | Concerns over food shortages after Brexit seem to be filtering into the public consciousness. A thread on stockpiling food, started on the Mumsnet parenting forum on Monday, has attracted more than 500 posts, with many users saying they were already taking precautions against empty shelves.

Cabinet Chortles | Environment Secretary Michael Gove provided the most memorable image in Tuesday’s Cabinet discussion, comparing those who are hoping for a better deal to middle-aged men holding out for movie star Scarlett Johansson. Justice Secretary David Gauke responded that perhaps the actress would be riding a unicorn — a reference to the idea that Brexit hardliners are chasing fantasies.

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To contact the editor responsible for this story: Anne Swardson at aswardson@bloomberg.net, Jones Hayden

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