April 03, 2019
Brexit has now literally reached the moment of crisis in the classical Greek sense of the word: a turning point. This can now go two ways: either Theresa May and Jeremy Corbyn reach a compromise or, failing that, the UK can still crash out of the EU without a deal. A new avenue has opened up, but the odds of no-deal Brexit are the same.
The new situation leaves EU leaders no choice but to go along with it for now. We will know within a few days whether May and Corbyn can reach agreement, or whether this goes back to the House of Commons. The main constraints for both leaders is the enormous radicalisation in British politics. A majority of 14 out of 27 cabinet ministers are now in favour of a no-deal Brexit. And a YouGov poll has 44% of Brits in favour of a no-deal Brexit against 42% Remain - if this were to be the final trade-off.
There have been no ministerial resignations yet, but the Tory party was clearly not a happy place last night. We thought this morning headline of the Daily Telegraph summed up the mood in the party right now:
"Theresa May's cabinet signals support for no-deal - but she turns to Jeremy Corbyn for help."
And the usually-smug second-referendum supporters were also distinctly unhappy about the prospect of being sidelined by May and Corbyn.
On a technical level, the route forward is relatively straight-forward. As we have been arguing before, the solution lies in changing the political declaration. Andrew Duff has an interesting new proposal. The European Council could separate withdrawal agreement and political declaration, and agree to have the latter amended and finalised during the transition period. A customs union would be, in our view, a sensible framework for a discussion, but it is not an off-the-shelf solution that can be agreed between two party leaders at a meeting. Nor does it solve the Irish border backstop problem. So, if there is compromise, it will be more about procedure than concrete outcomes.
The danger for May is that by pivoting towards the customs union May could lose more Tory MPs who supported her deal than Labour MPs who switch. It is not clear that, even if May and Corbyn were to agree on a compromise, it would find favour in the Commons. We assume it would.
This leaves us this morning with a similar set of choices as before: some version of a future relationship, based on the existing withdrawal agreement, versus a no-deal Brexit if this process falters. Both scenarios would be consistent with elections. No matter what happens now, May's government is likely to lose its majority.
The important thing to remember is that May's priority is to secure Brexit, not for her successor to win an election. Herein lies a political opportunity for compromise. There is a clear but narrow path forward. And we don't think the Tory party is ready for an election at this point. Her hand is perhaps a little stronger than it would appear.