From The Wall Street Journal

British lawmakers rejected Prime Minister Theresa May’s Brexit divorce deal for a second time, making a delay in the U.K.’s scheduled March 29 departure from the European Union all but inevitable and intensifying political turmoil and business uncertainty.

The heavy defeat on Tuesday—by 391 votes against to 242 in favor—opens a new chapter in Britain’s chaotic exit from the EU, a process that has already cost banks and companies billions, riven British society and splintered its political landscape.

The deal was meant to set the terms of the end of the U.K.’s decadeslong membership in the EU and its separation from a bloc that represents half of all British trade. Mrs. May’s defeat makes it likely that Parliament will force the government to delay Brexit beyond the end of the month to allow for further negotiations.

Mrs. May could now seek further concessions to her bill from the EU. However, a delayed departure increases the chances for a range of other outcomes, including another referendum over the U.K.’s membership in the EU or a general election.

Alternatively, Mrs. May could try to seek a different path to a majority vote by pursuing a closer relationship with the EU than she has spelled out so far, for example by seeking to stay inside the bloc’s common market or its customs union.

“These are unenviable choices, but thanks to the decision the House has made this evening they must now be faced,” Mrs. May told the House of Commons after the defeat.

The next step is for British lawmakers to vote Wednesday on whether to rule out leaving the bloc on March 29 without a deal, an outcome that would likely cause widespread disruption to travel and trade. Mrs. May said she would allow a free vote of her own party’s lawmakers on the issue.

A subsequent vote on Thursday will decide whether to postpone the scheduled departure date to allow for further negotiations. Both proposals are expected to pass.

The mood in Parliament was somber as Mrs. May, losing her voice, spelled out the conundrum lawmakers face.

“Voting against leaving without a deal and for an extension does not solve the problems we face,” Mrs. May said.

A request for an extension, which would be considered by EU leaders at a summit late next week, would raise two key questions: How long would it be for, and what would be its intended purpose?

Donald Tusk, the president of the European Council comprised of EU leaders, said the vote “has significantly increased the likelihood of a ‘no-deal’ Brexit.”

He said the 27 other EU governments would consider a “reasoned request” from the U.K. for an extension, noting they would need to agree unanimously. The leaders, he said, “will expect a credible justification for a possible extension and its duration.”

Most European officials believe the leaders will grant an extension, though there is a debate about how long. Some governments favor an extension to the end of the year or longer to allow the British to sort themselves out. Mrs. May has talked about a short extension.

Ever since Britons voted in June 2016 to leave the EU, the country and Parliament have been deeply and bitterly divided over the sort of future relationship to have with the bloc. EU supporters view a close relationship as a way to maintain some of the economic and security benefits of membership, while euroskeptics want to exit from the bloc’s orbit to maximize Britain’s freedom to make its own laws and strike trade deals with other countries.

The deal lawmakers voted down on Tuesday was one Mrs. May and her government negotiated in a wearying series of fraught meetings with the EU last year. It set the immediate terms for Britain’s exit, including settling budget commitments the U.K. had made to the EU and confirming the rights of EU and U.K. citizens living in the others’ territories. The prime minister’s bill would also have established a standstill arrangement under which existing economic, trade and security relations remain unchanged until at least the end of 2020.

However, a clause in the withdrawal deal demanded that no hard border go up between Northern Ireland, which is part of the U.K., and the Republic of Ireland, which will remain in the EU. That provision and a so-called backstop agreement insuring it created a deadlock that Mrs. May has failed to break. Euroskeptic lawmakers fear the backstop would lock the U.K. indefinitely in a customs union with the EU.

On Monday, Mrs. May secured last-ditch concessions from the EU on the Irish issue aimed at assuring euroskeptic lawmakers that Britain could escape from the backstop if future trading relations ensure no border would go up in Ireland. But those concessions failed to convince them.

Despite Tuesday’s defeat, Mrs. May continues to cling to office. She succeeded in reducing the margin of defeat to 149 votes on Tuesday compared with 230 when the first vote was held in January. This time 75 lawmakers from Mrs. May’s Conservative Party voted against her deal, compared with 118 in January.

After the vote Mrs. May said her deal remained the only one available, suggesting she could decide to present a version of the agreement to lawmakers for another vote.

The prime minister may hope that the longer that vote is delayed, the more pro-Brexit lawmakers fear Brexit could be canceled, potentially forcing them to swallow her deal. Some of these lawmakers have suggested they would vote for the deal if Mrs. May agrees to resign as prime minister after Brexit, in hope that her replacement would negotiate a different deal.

However, doubling down is risky for Mrs. May. Europhiles in Mrs. May’s cabinet are now pushing a deal whereby the U.K. would stay much closer to the EU’s economic orbit.

Options could include a second Brexit referendum over whether to accept the deal or remain in the EU, or to stay in the European Economic Area—joining a few economies like Norway outside the EU that accept the bloc’s economic rules and regulations. That would, however, preserve the current automatic right of EU nationals to work and settle in the U.K., something Mrs. May has said she wants to stop.

Mrs. May’s staying power is also in question.

Conservative lawmakers can’t oust Mrs. May as head of her party against her will until next December. But if dissatisfaction with her leadership grows, her government could potentially be rejected by a vote of no confidence in the House of Commons that would force a general election. Mrs. May could even request a general election over her deal, preferring that risk to the one of Brexit being reversed in a second referendum.

Tags:

Legal Notice