What Is Theresa May's Next Move? A Game of Brinkmanship Is On

(Bloomberg) -- The time might be approaching for Theresa May to finally pick sides, with Brexit talks deadlocked once again on the issue of the Irish border.

The prime minister’s options could eventually boil down to agreeing to a customs union with the European Union after Brexit -- solving the Irish problem but sending the hardliners in her party into a rage -- or sticking to her decision to leave it. Both come at a cost.

Here’s where those two roads might lead.

Defy the hardliners and agree to a customs union

  • With Brexit talks in stalemate, and pro-EU rebels growing in number, May decides she has no choice but to seek a customs deal that allows tariff-free trade and also solves the Irish border puzzle
  • The 62 pro-Brexit lawmakers led by hardliner Jacob Rees-Mogg cry betrayal as the whole point of leaving is to strike out alone. May no longer serves their purposes -- they might as well ditch her
  • The 48 signatures to trigger the vote of confidence that precedes a leadership contest are sent to the chairman of the 1922 Committee. Read more about that here
  • If she wins the vote of confidence, she has immediately shown the hardliners who’s boss. They have now been de-fanged and it’s all about “soft Brexit” now. Cabinet ministers resign and are replaced
  • If she loses, the Tory civil war spills out into the open. A moderate may emerge or a hardliner and pro-EU candidate could square off
  • If someone like Rees-Mogg wins, a messy walkout becomes the base-case scenario
  • If a Remainer like Home Secretary Amber Rudd wins -- less likely because euroskepticism is widespread with the rank and file -- the U.K. is suddenly on track to keep pretty close ties to the bloc, and the parliamentary arithmetic is in her favor

Defy the pro-EU rebels and call Ireland’s bluff

  • May sticks to her stated aim of leaving the customs union, insisting it’s the only way to strike new trade deals around the world and deliver on the referendum result
  • Pro-EU rebels aggressively pursue their amendment calling for the U.K. to remain in a customs union. The government is headed for defeat in a vote and behind-the-scenes maneuverings are going nowhere
  • May signals she regards the vote as tantamount to a vote of confidence in an attempt to bring the rebels to heel: if she loses, she’ll face calls for another election
  • Polls suggest that Labour might win this time, and with Jeremy Corbyn as prime minister the customs union option is firmly on table
  • If she wins the vote -- or somehow sidesteps one -- she has at least extended her political life
  • She goes back to Brussels and asks for a free-trade deal, with some add-ons. The time has come to call the bluff of the EU and Irish government
  • Ireland doesn’t want a messy no-deal Brexit and realists on both sides might agree to find ways to minimize the visible infrastructure on the border between Northern Ireland and Ireland
  • The final deal comes back to the U.K. Parliament for vote and the pro-EU rebels weigh up the costs of having another go at defeating May

For all that, May is an expert in kicking the can down the road, so it’s possible she finds yet another way to keep deferring a definitive crisis.

©2018 Bloomberg L.P.