Brexit Bulletin: Everything at Stake

(Bloomberg) -- Today in Brexit: Theresa May and opposition leader Jeremy Corbyn may finally decide if they can do a Brexit deal, a defining moment for Britain’s tortured exit from the EU.

What’s Happening?

The wait for white smoke to emerge from talks between the Tories and Labour on Brexit could finally be over.

After days of private optimism from officials on both sides, the two sides are set to meet Tuesday to find out whether there is a deal to be struck.

The stakes couldn't be higher: Failure to agree would boost the chances of another referendum or even an emergency general election, while May could be forced out and replaced with a Brexit hardliner who wants to leave the EU without any deal at all.

May’s offer to Corbyn reportedly includes a customs union-style arrangement lasting until 2022, the time of the U.K.’s next scheduled general election. Under the Conservatives’ proposal, Labour could then offer the electorate a full customs union while a future Tory administration could pursue a looser relationship that lets Britain strike trade deals with other countries, according to one person familiar with the discussions. The stickler is that Labour wants a customs union entrenched in law permanently, guaranteeing it will remain in place even after an election.

For all that, doing the deal won’t bring an end to the party leaders' worries. May faces perennial threats of deposition from her grassroots activists and rank-and-file lawmakers if she comes to an accord with Corbyn, a man they describe as a Marxist and sworn enemy of the Conservatives.

Corbyn is under pressure to make any agreement with May conditional on it being put to the public in another referendum, a move backed by more than 100 Labour lawmakers last week. Corbyn’s dilemma is that many Labour constituencies voted to quit the EU, and he’s loath to alienate that support base.

Even then, whatever May and Corbyn agree to still needs to pass multiple votes in Parliament, so it requires the support of a stable majority of lawmakers. Reading the tea leaves as it stands, that looks unlikely. 

Today’s Must-Reads

• Theresa May has spent the past 23 months trying to keep Jeremy Corbyn out of power. Now she needs him, and it’s been an uncomfortable and uneasy political courtship, Bloomberg’s Tim Ross reports. 
• What’s all this fuss about a customs union? Read Bloomberg’s explainer on the issue that could make or break the Brexit talks.
• Labour has no incentive to bail out May, and all roads now lead to a second referendum, Rachel Sylvester writes in the Times.

Brexit in Brief

Barnier Expects | European Union chief Brexit negotiator Michel Barnier said he hopes to see the results of the talks between the British government and Labour shortly. Speaking at a conference in Munich Monday, he reiterated that the EU is prepared to revise the political declaration on future U.K.-EU ties.

Buffett’s Backing | Berkshire Hathaway Chairman and investing guru Warren Buffett told his annual shareholders meeting that he hopes to do a deal in the U.K. and/or in Europe, “no matter how Brexit comes out.” Though he said Brexit is a mistake, Buffett said it “doesn’t destroy my appetite in the least for making a very large acquisition in the U.K.”

Banker Warnings | There's gloom in the City. HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Barclays Plc and Banco Santander SA have all used recent earnings statements to warn about the impact of Brexit, saying it’s dragging down profits and plaguing confidence.

On the Markets | Sterling ended its best week in two months on Friday, as currency traders looked ahead to the prospect of a Brexit deal this week. It surged above $1.31, but is still well below its post-Brexit highs of around $1.43.

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To contact the editor responsible for this story: Anne Pollak at apollak@bloomberg.net, Leila Taha

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