Brexit Bulletin: Where Do We Go From Here?

(Bloomberg) -- Today in Brexit: Cross-party talks aren’t going terribly well, Parliament is plotting, and the Army is on standby.

Prime Minister Theresa May is holding talks with opposition politicians to seek a compromise Brexit plan. But the leader of the opposition is boycotting them, and May is refusing to budge. She’s even promised Brexiteers she won’t cave in on their key demands. That makes it more likely that Parliament will take control of the Brexit process, and it’ll be up to a group of veteran lawmakers to find a way forward. 

So where do we go from here? With just 70 days to go until exit day, here’s a look at the most likely scenarios:

1. Brexit in Name Only, and Not Quite Yet

Keeping close ties to the European Union’s single market and customs regime might be the best way of getting a Brexit deal that Parliament can support, though May has ruled it out.

This option is known as “Norway-Plus” or “Common Market 2.0” to its supporters. Detractors deride it as “Brexit in Name Only.” Critics have a point: It would leave the U.K. taking rules from Brussels and wouldn’t address one of the main pledges of the referendum campaign — to bring an end uncontrolled immigration from Europe. Businesses would mostly be pleased, though the Bank of England doesn’t want to become a rule-taker.

How would we get there? Motions or amendments in the Commons need to show there’s support for the idea. The government would then ask for an extension to the March 29 deadline and a reopening of talks with the EU. The Withdrawal Agreement remains unchanged, including the much-loathed Irish border backstop. But the declaration on future ties is rewritten, making it very unlikely the fallback option will ever be used.

The plan then needs to get through the House of Commons. May might lose a couple of pro-Brexit ministers along the way, while the governing Conservative Party would be more divided than ever. Britain could then leave in late 2019 or 2020 and most people wouldn’t notice anything different.

2. Sign Up to a Customs Union

May has long promised not to sign up to a customs union, which would prevent the U.K. from striking new trade deals with other countries. That was another key pledge in the 2016 campaign. She reiterated that stance in private to Brexit hardliners on Thursday. Changing tack here would risk resignations by euroskeptic ministers and would lose her some Conservative supporters. But it might just be enough to win over pro-EU Conservatives, and some Labour MPs who would see it as close enough to the party’s official policy as to be acceptable.

This one also comes with an extension of the negotiating period, so Brexit won’t happen on March 29. And the Irish border issue won’t be completely fixed just by staying in the customs union. There’s a risk pro-Brexit Conservatives and the Northern Irish Democratic Unionist Party could be so outraged that they oust May’s government by lending their support to Corbyn’s next no-confidence vote.

3. General Election

Several paths lead to this one. Labour wins a no-confidence vote with the help of angry Brexit supporters and an election is triggered. Alternatively, May could call an election as the only way to get a mandate for her deal. The Daily Mail reports today that civil servants were told to draw up contingency plans in case of a snap poll. Still, it might not change the parliamentary arithmetic much. So the impasse remains unresolved. 

4. Second Referendum

If Labour repeatedly fails to get the general election Corbyn is seeking, the next option is to consider backing a second referendum. His party’s members voted at their conference last year that one should be on the table, so if Corbyn backs a re-run there’s a fair chance it will happen. About 10 Conservatives have already come out in favor of going back to the people, as have the smaller opposition parties. According to government research shared with lawmakers during cross-party talks yesterday, the process would take more than a year. The paper was “illustrative only” and set out “factual detail,” May’s spokeswoman said.

5. No Deal

This is the default option and the one both sides want to avoid. The U.K. Parliament is overwhelmingly against it and has tools to block it. Britain can also unilaterally reverse Brexit, according to a court ruling last month — another safety net. But May doggedly refuses to rule out no deal, and so businesses still have to prepare for the worst.

Today’s Must-Reads

  • The Great British Stockpile: Britain has turned into a warehouse as manufacturers, retailers and food producers build up vital supplies, Alex Morales and Joe Mayes report.
  • With a new Brexit vote planned for Jan. 29, here’s how lawmakers are plotting to take control of the process.
  • From Bloomberg Opinion: Jeremy Corbyn can't have it both ways on Brexit, argues Therese Raphael.

Brexit in Brief

Call in the Army | As opposition parties were telling Theresa May to take the no-deal option off the table, the government stepped up its no-deal planning with the dramatic announcement that it was putting Army reservists on standby. The order goes into effect in February and lasts a year. 

Factory Shuttered | Royal Philips NV said it will close a baby products factory in the U.K. next year that employs about 1,500 people. The high-tech company had repeatedly warned that anything short of seamless post-Brexit trade could result in the shutdown of the site, which makes products such as Avent brand bottles and dummies.

Remainer Threat | As many as 20 ministers have indicated they will resign if members of Parliament aren’t allowed a free vote when the House of Commons debates backbench moves to try to prevent a no-deal Brexit, the Telegraph reports.

Ditching Davos | May isn’t going to next week’s World Economic Forum in Davos, choosing to stay home and sort Brexit instead. She’s the third major leader to drop out: President Donald Trump canceled his visit because of the U.S. government shutdown, and French President Emmanuel Macron is staying home after weeks of protests against his reform program.

Labour Divided | Labour leader Jeremy Corbyn could face a series of resignations from his core team if he backs a second referendum, the Guardian reports. Corbyn said on Thursday that a second vote should remain an option, though he still prefers to try to force a general election. 

How to Avoid a Referendum | Former Labour Prime Minister Gordon Brown has a new idea to break the deadlock: delay Brexit a year and hold citizens' assemblies nationwide to consult the public on the way forward. “Our crisis is now so profound that Parliament cannot now solve it on its own,” he said.

Remain Ahead? | Support for remaining in the EU surged to a post-2016 record, according to a YouGov poll published by the campaign for a second referendum. The poll of more than 1,000 people showed Remain holding a 12 percentage-point margin — compared with the 4-point margin in the 2016 referendum.

Boris’s Bid | Boris Johnson will give a speech in the north of England today arguing that controlling immigration will help push up wages, and calling for taxes to be handed to regional politicians to spend locally. It looks a bit like a leadership pitch.

On the Markets | The pound headed for its longest run of weekly gains in a year, touching $1.2994 early on Friday. But the bond market showed signs of stress, John Ainger reports. Investors have been flocking to the safety of longer-dated gilts, preferring them over shorter maturities, a sign that they think the risks surrounding the economy are growing. 

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