(Bloomberg) -- U.K. Prime Minister Theresa May stamped her authority on pro-Brexit cabinet rebels on Friday, forcing them to back her plan to keep close trade ties with the European Union after leaving.
The pound rose and the country’s main business lobbies welcomed the proposal, which came as May warned ministers that if they criticize her policies in future they will lose their jobs.
It was enough to convince outspoken Brexit campaigners including Foreign Secretary Boris Johnson and Brexit Secretary David Davis to get in line, even as her plan goes against much of what they wanted.
After more than 12 hours of talks at May’s “Chequers” country residence, the Cabinet signed off on a blueprint for the future relationship that Britain will seek to negotiate with the EU.
The meeting, which sprawled over lunch and dinner, produced a plan for a new U.K.-EU “free trade area.” It involves Britain weaving its customs regime around the bloc’s rules, and adopting identical regulations for industrial and agri-food goods.
There was no such design for close ties for Britain’s huge services sector, and London-based banks were warned they will lose their current levels of access to the EU market. New arrangements will seek to preserve the “mutual benefits of integrated markets.”
After weeks of speculation about Cabinet resignations and leadership plots against her, the deal marks a significant milestone for May and for Brexit. The plan represents a closer relationship to the EU single market than many pro-Brexit campaigners hoped for when May first set out her plans in January last year. But none of the Cabinet’s Brexit backers quit. It’s a good result for business, which has stepped up its lobbying efforts in recent weeks, warning of the dire consequences of severing trade ties to the bloc.
“Essentially it seems like May won, with some minor throwaway lines to placate the Brexiters,” said Sam Lowe, a senior researcher fellow at the Centre for European Reform.
Euroskeptic lawmakers exchanged complaints on their WhatsApp group, with former Tory leader Iain Duncan Smith saying: "I want to know what the Brexit Cabinet ministers were doing." Another pro-Brexit Conservative lawmaker, Andrew Bridgen, told Bloomberg: “This looks like a weak form of Brexit even before the EU negotiators weaken it further.”
But Jacob Rees-Mogg, the high-profile chairman of the pro-Brexit caucus of Tory lawmakers, a man who has regularly demanded that May walk away from the negotiating table, was reluctant to criticize the proposals on Saturday morning. “I think this deal raises a lot of questions,” he told the BBC. “We’ve seen three pages out of 120.”
Although Rees-Mogg said he’d be willing to vote against a deal that he judges to be a “punishment Brexit,” his comments were emollient, given that two days earlier he’d demanded May rip up her plan up on the basis of a few leaked lines.
The EU’s chief Brexit negotiator Michel Barnier welcomed the discussions on Twitter, saying he looks forward to the so-called White Paper.
There is now a chance that the negotiations between the U.K. and EU -- which have been stalled for weeks -- will be able to move forward toward concluding the divorce terms and mapping out the outline of a future trade deal by October. Lowe said: “The EU will not go along with this, but I’m interested to see if they string it out so as to get the withdrawal agreement over the line.”
Despite her victory on Friday, May still faces battles to come. First she must ensure that EU leaders at least agree to discuss her latest proposals, and don’t reject them out of hand. She could still face a backlash from Brexit true believers inside her Tory party in Parliament -- if not now then when she brings the deal back from Brussels in the Fall.
No More Dissent
Rees-Mogg told the BBC on Saturday that he’d vote in parliament for the platform the Conservatives put forward at the last election. Although there may be disputes about interpretation, May now has pro-Brexit Cabinet ministers on her side saying this is what her proposals deliver.
And euroskeptic ministers such as Davis and Johnson seem to have backed down. In the run-up to the meeting, they were vocal in their concerns over May’s move towards a softer departure -- particularly her plan for keeping EU rules on goods, and a close customs partnership, which Johnson described as “crazy.”
On Friday, both decided not to start a fight at Chequers. Davis gave a speech urging colleagues to get behind May, while Johnson raised a toast to the prime minister during dinner, people briefed on the encounter said.
Johnson raised some concerns in the afternoon, but was “pretty positive by the time we got to dinner,” according to one minister in the room. “Brexiteers meet reality and -- to their credit -- don’t run away,” the minister said. Environment Secretary Michael Gove, another key Brexit campaigner, spoke in support of May’s plan, and that helped shift the mood, according to another person familiar with the meeting.
May herself also changed gear on Friday. She sought to draw a line under the months of infighting and decisively put her foot down. In a letter to Conservative lawmakers, obtained by Bloomberg News, she wrote that while she has allowed Cabinet colleagues to “express their individual views” in the past, that privilege is now revoked.
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