May’s govt wants to leave the single market and customs union in March 2019

By BLOOMBERG

LONDON • Brexit talks resumed yesterday with Prime Minister Theresa May (picture) under pressure on two fronts: European negotiators are pushing her to reveal her hand, while the Opposition Labour Party has made a bid to lure May’s critics to their side.

Labour’s announcement that it wants Britain to stay in the European Union’s (EU) single market and customs union for up to four years after it leaves the bloc — and possibly longer — looks set to strengthen the hand of anti-Brexit Conservatives to push for a softer split. The proposal, if it shifts the debate, will delight business leaders who fear the government’s plan to leave the single market in 2019 will cause catastrophic economic damage.

The move comes just as May’s deeply divided Cabinet had started to reach a consensus about what Brexit — and the first years after the split — should look like.

As the next round of divorce talks gets under way, shifting domestic politics in Britain will once again hang over the negotiations.

“May could be forced to change her approach to the negotiations after a significant change of policy by the Labour opposition,” said Mujtaba Rahman, MD of Eurasia Group in London.

While it’s not clear whether European officials would welcome the Labour proposal, the party will soon have the chance to test support at home for its idea. Legislation that seeks to prepare Britain for leaving the EU returns next month to Parliament, and lawmakers are expected to battle over amendments.

“Labour has created an opportunity for Britain to avoid inflicting on itself the economic costs inherent in the government’s chosen path,” former Labour Business Secretary Peter Mandelson, usually a critic of his party’s current leadership, wrote in the Financial Times.

“But achieving this depends on what others in Parliament do, including those on the Tory benches who know the risks of turning a crisis into an economic calamity. Labour has done Parliament and the public a big favour in starting what will be a complicated debate,” he said.

May’s government wants to leave the single market and customs union in March 2019, but then have a transition period of up to three years to allow both sides to adapt. Labour argues there isn’t time to negotiate a transitional arrangement as well as a final deal. Many who oppose Brexit like the Labour idea because it would also give voters more time to change their minds as the consequences of the split become clearer.

Pro-Brexit Conservatives have tended to oppose a long transition not only because it could be a first step toward reversing the referendum result, it would also mean several more years with the UK open to EU migration and paying into the common budget. The Tories would face fighting the next election — due by 2022 — open to the criticism that Britain hadn’t really left the EU at all.

“May would have a huge dilemma if a majority of MPs were to back Labour’s policy,” said Rahman at Eurasia Group. “If she accepted a Commons vote in favour of it, she would face a backlash from hardline Brexiteer Tory MPs, who might well try to oust her by forcing a Tory leadership contest.”

The next round of talks began about 5pm. Brussels time yesterday, as the EU told the UK it needs more details of its position. EU officials have signalled they expect little movement, despite a series of UK position papers published during the last two weeks. Still, Brexit secretary David Davis will ask his EU counterpart Michel Barnier to use “flexibility and imagination” to allow talks to move forward.

“For the UK, the week ahead is about driving forward the technical discussions across all the issues,” Davis will say yesterday, according to his office. “We want to lock in the points where we agree, unpick the areas where we disagree, and make further progress on a range of issues.”

His goal is to make enough progress by October, when EU leaders meet for a summit, to get approval for the talks to move on to trade — something EU officials currently say privately is unlikely as they key obstacle of the exit bill hasn’t been tackled. — Bloomberg