Theresa May, U.K. prime minister, left, and Jean-Claude Juncker, president of the European Commission, arrive for a photo opportunity ahead of talks in Brussels, Belgium. (Photographer: Jasper Juinen/Bloomberg)

U.K.'s May Races to Escape Brexit Impasse After Tory Defections

(Bloomberg) --

U.K. Prime Minister Theresa May is racing to find a way out of the Brexit impasse amid mounting evidence that an agreement is within reach. 

Brexit Secretary Steve Barclay and Attorney General Geoffrey Cox are due in Brussels on Thursday with proposed changes the U.K. is seeking to the divorce deal to make it acceptable to the House of Commons.

U.K.'s May Races to Escape Brexit Impasse After Tory Defections

That follows a meeting Wednesday between May and European Commission President Jean-Claude Juncker that they described in a joint statement as "constructive." Meanwhile Spanish Foreign Minister Josep Borrell told Bloomberg an agreement is already being hammered out. In a sign of rising optimism in May’s team, two senior ministers privately predicted a deal would be reached within days with a potential vote in Parliament next week.

With fewer than 40 days to go until Brexit day, both sides are wrestling with how to get a deal over the line. They’re trying to avoid the U.K. crashing out of the bloc without an agreement, potentially crashing the pound and damaging both the British and EU economies. Highlighting the risks, Fitch Ratings said it may cut the U.K.’s AA credit rating, citing the economic disruption a no-deal departure could cause.

Irish Backstop 

The progress in Brussels comes as problems mount domestically for the premier with lawmakers quitting her party and ministers plotting to challenge her in a crunch vote next week.

The deal May reached last year with the EU was rejected by the House of Commons last month in a record defeat for a U.K. government. Objections from the pro-Brexit wing of her Conservative Party centered on the so-called Irish backstop, which seeks to guarantee no hard border in Ireland after the split. May is now seeking legal guarantees to ensure the backstop can only be temporary.

U.K.'s May Races to Escape Brexit Impasse After Tory Defections

One of the ideas the British side has been considering is an added “codicil” or appendix to the Brexit deal. This legally enforceable text could give the U.K. a unilateral exit mechanism from the backstop, but with a long 12-month notice period, according to a senior official who asked not to be named.

Working ‘At Pace’

May and Juncker on Wednesday discussed what legal assurances are possible on the temporary nature of the backstop, according to their statement. Crucially, it made no mention of reopening the withdrawal agreement, a key demand of May’s domestic opponents. The two leaders also discussed possible additions to the political declaration setting out the broad strokes of a future relationship between the U.K. and EU.

“We’ve agreed that work to find a solution will continue at pace,” May told broadcasters after their meeting. “Time is of the essence, and it’s in both our interests that when the U.K. leaves the EU it does so in an orderly way.”

In a sign of how little faith the EU has in May’s ability to drive a renegotiated deal through Parliament, the bloc wants to test proposed changes to the backstop in the House of Commons first. Only when they’re sure it’ll do the trick would they then get EU leaders to sign off on the text at a summit, two officials told Bloomberg.

Ministerial Challenge

But the premier wants to be able to show Parliament that she’s made significant progress on getting the Irish backstop fixed by next week, according to a person familiar with her plans.

She’ll attend an EU summit in Egypt on Sunday, and talks on Brexit are expected on the sidelines. It’s not a European Council meeting and not all leaders are expected to attend, so major decisions can’t be made there.

May is racing to beat a deadline of Feb. 27, when Parliament is due to have another vote on Brexit. If she has nothing to show for her efforts by then, rank-and-file lawmakers are threatening to seize control of the process, and force her to postpone the March 29 exit day.

In a sign of the challenge the prime minister faces next week, as many as 15 ministers are debating voting against her Brexit strategy and then challenging her to fire them in next week’s planned ballots, three people familiar with the matter said. The senior officials want to back a cross-party effort to stop Britain crashing out of the bloc without a deal.

Adding to her domestic woes, three lawmakers quit the party Wednesday to join eight Members of Parliament who earlier this week quit the Labour Party. One of them, Heidi Allen, told reporters she couldn’t imagine rejoining the party "not least because if we do our jobs right, there won’t be a Tory party to go back to."

Announcing their resignations, Anna Soubry, Sarah Wollaston, and Allen criticized the premier for trying to placate the hard-line Brexiteers in her party and warned that more Tories may quit. Late Wednesday, the pro-EU former Attorney General Dominic Grieve, told the BBC that if the government took Britain toward a no-deal Brexit, he too would have to quit.

©2019 Bloomberg L.P.