A European Union (EU) flag flies in front of Elizabeth Tower, commonly referred to as Big Ben, during a Unite for Europe march to protest Brexit in central London, U.K. (Photographer: Luke MacGregor/Bloomberg)

U.K. to Drop Brexit Demand on Irish Border to Ease Deal

(Bloomberg) -- U.K. Prime Minister Theresa May is said to be ready to ditch one of her key Brexit demands in order to resolve the vexed issue of the Irish border and clear the path to a deal, according to people familiar with the matter.

The fix opens the possibility that Britain would end up bound indefinitely to the European Union’s customs rules. While that’s something that the EU and many businesses want, it risks detonating a crisis in May’s government that could even bring her down.  

Until now, May has insisted that a legal guarantee to ensure no new border emerges on the island of Ireland should be strictly limited in time. May and pro-Brexit politicians in her Conservative party want an end date for the policy to avoid delaying the U.K.’s departure and to ensure the country is free from EU customs rules to strike its own trade deals around the world.

But the EU has rejected her stance and talks have been stuck for months.

Now May and her team of Brexit advisers accept the EU’s point that it must be open-ended, for an "enduring" solution, one of the people said. The proposal is for the whole U.K. to stay tied to EU customs rules as a so-called backstop -- or guarantee clause. There would also be some new checks on goods between Northern Ireland and mainland Britain.

The pound rose on the news.

The problem for the pro-Brexit camp in May’s Cabinet is that what is agreed as a fix for the Irish border could morph into a long-term status quo for the whole U.K. Businesses have long called for the U.K. to remain in the customs union to ease trade with the bloc, an option EU chief negotiator Michel Barnier has repeatedly offered as a way out of the stalemate. In parliament, the main opposition Labour party is also pushing for a customs union.

U.K. to Drop Brexit Demand on Irish Border to Ease Deal

The thorny question of how to avoid a hard border between the U.K. and the Irish Republic has held up progress in Brexit talks since March. Time is running out for the EU and the U.K. negotiating teams to settle the terms of the divorce and sketch out the future trading arrangements before Britain leaves the bloc on March 29.

A summit of EU leaders in Brussels this week had been billed as the moment when the exit agreement would be struck but instead broke up with major issues still unresolved. The key question remains how to come up with a backstop for the Irish border.

The new backstop would act as an open-ended insurance policy in case the overarching future trade deal between the U.K and the EU does not avert the need for customs checks at the Irish border, one person familiar with the U.K. position said.

The details still need to be worked out in the negotiating room but British and EU officials believe the plan will be acceptable to both sides, the people said.

In Brussels on Thursday, reports began to emerge that May was ready to give ground on the issue.

Irish Europe Minister Helen McEntee said May was "very clear" in saying that the backstop is an insurance mechanism and so can’t be time-limited. “You need to have it there and it can’t run out after a year or two and she very much agreed with that,” she told RTE.

May avoided giving a direct answer when asked to confirm that this was her position on Thursday. She said only that nobody wants the backstop to be necessary at all.

However, there’s still one more sticking point. The U.K. is trying to convince the EU to ditch its own proposed backstop clause -- a measure that could essentially carve Northern Ireland off from the rest of the U.K. The EU wants its clause to be included in the withdrawal treaty, even if only as a secondary, last-resort guarantee that would only be invoked if the U.K.’s clause failed.

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