May Tames Divided Tories as Business Cheers Soft Brexit Plan
U.K. plan keeps EU rules on goods but goes own way on services.
(Bloomberg) -- U.K. Prime Minister Theresa May imposed her vision of a soft Brexit on her divided Cabinet, pleasing business with a plan to keep close trade ties to the European Union and telling insolent ministers to get behind her or resign.
Her plan, which would set up a free-trade area with the EU and mirror EU rules for goods and food, goes against much of what pro-Brexit Cabinet ministers have long demanded. But after months of threatened resignations or leadership challenges, none have so far materialized.
It’s a victory for May, long written off as a weak and indecisive leader with no authority, and a win for business, which has stepped up its lobbying efforts in recent weeks, with household names warning of the dire consequences of a messy divorce. Business lobbies welcomed her plan.
So did chief EU negotiator Michel Barnier, though he still needs to look at the details, many of which he won’t like. There were messages in the Cabinet’s statement aimed directly at unblocking talks, which have been all but stalled since March and are meant to be wrapped up in just 15 weeks.
May said she expects the EU to engage with her proposal.
"From the soundings I’ve had so far, there is a willingness to sit down to talk about this," she told the BBC in an interview Saturday.
The prime minister is not out of the woods. Still, even Jacob Rees-Mogg, the outspoken Brexit hardliner who commands enough support in Parliament to trigger a leadership challenge, reserved judgment. Nigel Evans, a lawmaker who’s taken hardline Brexit positions as recently as February, said he could back May’s plan.
“I, as a Brexiteer, am happy and content to back the PM," Evans told reporters after May’s chief of staff briefed lawmakers on the proposals.
Clearing a Path
May’s plan keeps the U.K. tied to EU rules for goods, but able to diverge on services -- and the Cabinet acknowledges that will mean financial services won’t have the same access as before. It appears to have dropped an earlier proposal for "mutual recognition” of regulation for financial services.
The EU has objected already to partial access to its single market, saying the U.K. can’t pick and choose the bits it wants. It’s all or nothing. May’s plan also leaves the door open to some flexibility on EU immigration but stops far short of the EU’s demand that free movement of people is a non-negotiable aspect of single market membership. May told the BBC it was still to be decided whether EU citizens would get preferential treatment, leaving the door open for more concessions as she goes into the next stage of negotiations.
Her proposal on goods also aims to solve the problem of the Irish border, which remains the major sticking point in talks with Brussels. The EU demands a backstop, or guarantee, that no hard border will emerge on the island after the divorce but neither side can agree on how that last-resort clause should be worded. The Cabinet says the new plan means the backstop will never have to be brought into effect, though the U.K. will sign the legal text "nonetheless." This, the Cabinet says, will help unblock negotiations.
Irish Foreign Minister Simon Coveney on Saturday said the U.K. text "needs and deserves detailed consideration."
Irish Border
If May keeps her Cabinet ministers and lawmakers on board over the summer and into the final stage of talks, then a path appears to be opening up to an orderly divorce. The final trade deal doesn’t need to be agreed until after Brexit day next year. All the two sides need to settle now is to a legally binding divorce deal -- which is nearly there apart from the Irish border issue -- and then a non-binding political statement setting out what the two sides want the future trade deal to look like. A vote in Parliament this autumn will be May’s last big test of her Brexit plan and that’s an opportunity for pro-Brexit opponents to try to bring her down.
“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,” Sam Lowe of the Centre for European Reform, said.
BuzzFeed reported that the EU would reject it, even as public statements so far reserve judgment.
‘Confidence Boost’
The country’s main business lobby the Confederation of British Industry, said the plan was a "genuine confidence boost" and appeared to be based on evidence companies have put forward. Other industry groups agreed.
May has changed her tone. Since losing a snap election last year, her authority has waned and she has allowed ministers to get away with unprecedented acts of defiance. Foreign Secretary Boris Johnson, for example, has publicly criticized her policies and used words like "crazy" to describe her proposals. Brexit Secretary David Davis has made his opposition to a soft Brexit clear, and has made several resignation threats.
After the meeting on Friday, May called time on the defiance. If ministers step out of line now, they will have to go.
On Friday, Johnson and Davis, both pictured in shirt sleeves on a sweltering day in the English countryside, decided not to start a fight. Davis gave a speech urging colleagues to get behind May, while Johnson made a toast to the prime minister during dinner, people briefed on the encounter said.
Gove, Johnson
Johnson raised some concerns earlier in the day, but was “pretty positive by the time we got to dinner,” according to one minister in the room. Environment Secretary Michael Gove, another key Brexit campaigner who has emerged as a pragmatist, spoke in support of May’s plan. That helped shift the mood, according to another person familiar with the meeting.
“Brexiteers meet reality and -- to their credit -- don’t run away,” the minister said.
They’ve already had to swallow a lot -- such as agreeing to a divorce bill they opposed and then accepting EU rules during the two-year transition period after exit day. May has gradually pulled them around to her vision for a Brexit that her whole party can support. She needs to keep them all onside as she doesn’t have a parliamentary majority, so every vote will count when she puts the final deal to Parliament.
--With assistance from Jessica Shankleman and Tim Ross.
To contact the reporters on this story: Emma Ross-Thomas in London at erossthomas@bloomberg.net;Robert Hutton in London at rhutton1@bloomberg.net;Kitty Donaldson in London at kdonaldson1@bloomberg.net;Alex Morales in London at amorales2@bloomberg.net
To contact the editors responsible for this story: Heather Harris at hharris5@bloomberg.net, Steve Geimann
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