A British Union flag next to a European Union (EU) flag, in London. (Photographer: Chris Ratcliffe/Bloomberg)

U.K. and EU Diplomats Now Assume Brexit Will Be Delayed

(Bloomberg) -- British and European Union diplomats are now working on the assumption that the U.K. will leave the bloc later than the planned exit date of March 29 if Prime Minister Theresa May loses Tuesday’s Brexit deal vote in Parliament.

Officials dealing with Brexit for the U.K. and EU are separately preparing for the possibility, even though there have been no discussions on the issue between the two sides and no indication from May that this is her plan, according to four people familiar with the situation.

Much depends on the scale of May’s expected defeat on the Brexit deal in Parliament. If she loses heavily, EU officials said they think she’ll have no other option than to extend the Brexit negotiating period -- known as Article 50 -- to have time to convince lawmakers to back the deal.

“Even if things don’t go our way this evening in the vote in the British Parliament, and even if the next few weeks and months are rocky, it’s important that we continue to sing from the same hymn sheet,” Austrian Chancellor Sebastian Kurz told the European Parliament Tuesday in Strasbourg, France, appealing to EU unity.

U.K. and EU Diplomats Now Assume Brexit Will Be Delayed

While May repeated “we’re leaving on March 29” during a question-and-answer session after a speech Monday in the English city of Stoke-on-Trent, she didn’t rule out delaying the departure date. “I’ve been clear that I don’t think we should be extending Article 50,” she said.

Markets are starting to price in the prospect of a delay, which would prevent the U.K. crashing out of the bloc without divorce terms or a transition period to smooth the process. But the move would be politically perilous for May as the pro-Brexit faction of her party would see it as a betrayal.

U.K. and EU Diplomats Now Assume Brexit Will Be Delayed

For a postponement, the U.K. must make a formal request to the EU and all the remaining 27 EU leaders must agree to it. EU officials said a delay until the start of July would be simple. Anything beyond that is likely to face more resistance because the European Parliament reconvenes that month after elections in May in which the U.K. isn’t due to take part.

While British officials said an extension isn’t definite, the amount of legislation the U.K. Parliament needs to pass before the country can leave the EU increases the likelihood of a delay, they said. EU officials have told them that this sort of “technical” extension would almost certainly be approved. Both sides’ officials spoke only on condition of anonymity because of the sensitivity of the discussions and because it isn’t an official position.

Many on the EU side now think that a delay is the only way to solve the impasse over May’s Brexit deal and have quietly been making that known to the U.K., officials said. The EU wants to avoid the U.K. crashing out of the bloc without a deal, and many diplomats are prepared to spend time giving the government reassurances to help May win the backing of Parliament.

In a letter to May published Monday, Jean Claude Juncker and Donald Tusk, the presidents of the European Commission and Council, offered some assurances over the Brexit deal in an attempt to help her win Tuesday’s vote. But their words are unlikely to shift opposition to the deal.

May’s response to the expected defeat Tuesday will guide the EU on its next move, officials said. In addition to a possible three-month delay to Brexit, this could include:

  • Further legally binding assurances over the deal, possibly in the form of a separate declaration which would effectively oblige the EU to make all attempts possible to complete a full trade deal to replace the backstop;
  • Reopening the Brexit deal if May softens the U.K.’s position, for example signing the U.K. up to the EU’s customs union;
  • Delaying Brexit further beyond July if there is a chance that the U.K. decides against withdrawing from the bloc or, for example, another referendum or election was called.

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