Six Things We Learned From Theresa May's Vision for Brexit

(Bloomberg) -- The world now knows what Theresa May wants from Brexit: To stay as close as possible to the European Union while opting out of a customs union. This is where things get difficult.

To reach a negotiated outcome more compromises are needed within her Conservative Party, either from the hardliners or the pro-EU side. We can’t predict who will cave, but here is what’s become clear.

May is willing to take on her hardliners a bit

One section of the speech was titled “facing up to some hard facts.” May didn’t say exactly who it was that had to do this “facing up,” but it seemed directed at the pro-Brexit wing of her party. She told them that Brexit is complicated, that it will hurt the U.K.’s access to the EU’s markets, and -- most controversially for some Tories-- that the European Court of Justice will continue to affect the U.K. She even said Britain would need to accept “binding commitments” in order to get a trade deal. “It’s injected a very welcome note of realism,” said Nicky Morgan, an anti-Brexit Conservative.

But the so-called Brexiteers are still pretty happy

How’s that possible? Because May left the option of future divergence from the EU on the table. For the European Research Group, which can mobilize 62 Tory hardliners, this is the crucial point. A lot of their interventions in recent weeks have been aimed at stopping May from ruling things out. Their theory is that they don’t need to get a clean break right away, as long as they can inch toward it, even if it takes years.

May accepts the Irish border is a problem

“It is not good enough to say, ‘We won’t introduce a hard border; if the EU forces Ireland to do it, that’s down to them,”’ May said. “We chose to leave; we have a responsibility to help find a solution.” This was a gentle rebuke to, among others, the ERG chairman Jacob Rees-Mogg, who has said precisely this. It was also a diplomatic olive branch to the EU.

But she doesn’t have a solution

Sorry. It is quite a hard one to solve. Read more about why that is here.

May is still sitting on the Brexit fence

Another way of explaining why all sides of the Tory party are happy is that May threw everyone a crumb. She tipped her hat to the anti-Brexit side by acknowledging that Brexit involves a lot damage-limitation. But she also had language in there to please the pro-Brexit side: “the freedom to negotiate trade agreements with other countries around the world” and wanting to“take back control of our laws.”

But here’s the catch

The initial response from the EU was chilly. The speech doesn’t change the parliamentary arithmetic. Most lawmakers want an arrangement to keep goods in European supply chains moving tariff-free in and out of the U.K. -- otherwise known as a customs union.

She’s also learned a few things since her early days in power. Namely: “Neither of us can have exactly what we want.”

©2018 Bloomberg L.P.