Theresa May, U.K. prime minister, departs number 10 Downing Street in London, U.K. (Photographer: Simon Dawson/Bloomberg)

Could May Be Forced Into the Softest Brexit After Key Vote?

(Bloomberg) -- Prime Minister Theresa May could be forced into a Brexit that keeps the U.K. inside the European Union’s single market after she loses the crunch vote on her deal next week.

Follow @Brexit on Twitter, join our Facebook group and sign up to our Brexit Bulletin.

Could May Be Forced Into the Softest Brexit After Key Vote?

That is the view among some senior officials inside the government, on both the pro- and anti-Brexit wings of the Conservative Party.

On Tuesday, Parliament is slated to vote on whether May’s Brexit deal should survive or die. All the signs are that politicians in the House of Commons will choose overwhelmingly to stop the agreement May has struck after 18 months of talks with the EU.

Rewriting her plan to maintain the closest possible ties with the bloc after the split would be the best chance of winning a majority in Parliament, officials think.

The premier will decide on Monday whether or not to push ahead with the vote, given that the stakes are so high. If she loses, the U.K. will be facing a chaotic exit from the EU without a deal, and May herself could be forced from office in the political upheaval that could follow a heavy defeat.

The question is what will happen after May’s deal is voted down. For now, ministers argue in public that no other plan can command a majority in the Commons, but in private senior officials take a different view.

Norway Model

The idea that’s gaining ground among both euroskeptics and pro-Europeans in the government is for the U.K. to become a member of the European Economic Area. That would see the U.K. adopt a relationship with the EU modeled on that of Norway.

Two officials, speaking on condition of anonymity, said Cabinet ministers including Pensions Secretary Amber Rudd, Chancellor of the Exchequer Philip Hammond, and Business Secretary Greg Clark -- all pro-EU politicians -- would back that option.

This plan would involve the U.K. joining the European Free Trade Association (EFTA), and thereby taking part in the European Economic Area, which includes access to the single market. That would be good news for business, particularly exporters and the finance industry, which would probably be able to maintain its current access to the bloc.

Pro-EU Conservatives support this Norway model, as does a significant part of the Labour Party. Smaller parties could also back it, and there’s a chance May’s Northern Irish allies in the Democratic Unionist Party would too.

Rudd, in an interview published Saturday in the Times, said her preferred alternative is the Norway plan, which “seems plausible not just in terms of the country but in terms of where the MPs are,” but she added that “nobody knows if it can be done.” Rudd said she supports the withdrawal agreement. She also didn’t rule out another referendum, according to the BBC.

“If it doesn’t get through, anything could happen: people’s vote, Norway Plus, any of these options could come forward, and none of them are as good as the current arrangement we’ve got with the withdrawal agreement,” Rudd said on BBC Radio 4’s “Today” program.

Could May Be Forced Into the Softest Brexit After Key Vote?

In addition, unlike Norway, the U.K. would need a customs union with the EU to avoid a hard border with Ireland. The glitch is it would mean free movement of people would continue, which many -- including May -- consider a betrayal of the referendum result.

Former minister Nick Boles, who’s championed the so-called Norway-plus model, says he believes it will appeal to both pro-Leave and pro-Remain members of Parliament.

“Norway Plus is a compromise that has broad appeal to the pragmatic middle,” Boles tweeted on Friday. “It delivers a softish Brexit with a deal that preserves membership of the Single Market and keeps the union of the U.K. intact.”

The View From Brussels

EU leaders are ready to explore the option of Norway and it wouldn’t necessarily delay Brexit, according to European officials. But the bloc wouldn’t agree to it definitively until Britain leaves the EU. That’s because Brexit is in two parts -- first the divorce, then the future relationship, which has only been agreed in vague outline for now.

The EU would probably impose stricter conditions on the U.K. than it currently does on Norway, officials said. This could include tough “level playing field” rules to restrict the British economy and ensure the U.K. can’t undercut European businesses. It also could include giving EU countries better access to U.K. fishing waters.

Crucially, the EU is likely to insist that the much-hated Irish backstop clause remains as an insurance policy in case future negotiations fail, officials said, meaning the EU is unlikely to reopen talks on the divorce deal agreed last month. That could be a problem for May in Parliament, though she could argue with some conviction that with a Norway-style deal as the final destination, the backstop would almost certainly not be needed.

©2018 Bloomberg L.P.