May's Brexit War Cabinet Said to Remain Stalled on Customs

(Bloomberg) -- No one in Prime Minister Theresa May’s Cabinet is showing any signs of changing their mind on the U.K.’s best option for post-Brexit customs arrangements with the European Union, a senior government official said.

The official, who declined to be identified discussing private matters, said the impasse needs to be resolved by next month’s EU summit. But there’s no sign yet of that happening, with the well-flagged problems with each solution still in need of solutions.

The official also said that it’s an open possibility the government will seek to extend customs arrangements with the EU beyond a transition period that’s due to last from next March to December 2020, and then go for the option favored by Brexit hardliners rather than May herself. But Cabinet agreement is a prerequisite, as is allaying EU concerns that such a deal wouldn’t open the bloc up to an influx of goods that don’t meet European standards.

May’s 11-strong Brexit war cabinet split 6-5 three weeks ago on the two options for Britain’s future trading relationship with the bloc.

May was in the minority preferring a so-called customs partnership in which Britain levies tariffs at EU rates, providing refunds for goods destined to British markets if U.K. tariffs are lower. The other option, dubbed maximum facilitation, or Max Fac, would use trusted trader programs and technology. May’s proposal ties the U.K. more closely to the EU, while Max Fac is a looser arrangement.

EU Dislikes Both

With the EU rejecting both options, and the Cabinet acknowledging flaws in both, May tasked two working groups of ministers to try to improve on each of them. But another person familiar with the Cabinet debate said some of the work done by those groups -- including trips to the Irish border -- has only served to entrench the deadlock.

The premier has tasked Northern Ireland Secretary Karen Bradley and Business Secretary Greg Clark to work to improve the maximum facilitation plan in conjunction with Brexit Secretary David Davis, the only minister of the three to support it.

Environment Secretary Michael Gove and Trade Secretary Liam Fox are focusing on the partnership plan with May’s de facto deputy, Cabinet Office Minister David Lidington. Lidington is the only supporter of that proposal in the group and the other two, both Brexit enthusiasts, are opposed.

Chancellor of the Exchequer Philip Hammond said on Thursday that both options remain "works in progress."

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net;Kitty Donaldson in London at kdonaldson1@bloomberg.net

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, ;Emma Ross-Thomas at erossthomas@bloomberg.net, Stuart Biggs

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