May Plows Ahead With Brexit Plan Amid Doubts Over Strategy

  • May poised to form government with backing of N. Irish party
  • Voters indicate preference for keeping access to single market

Theresa May's Future Uncertain as Brexit Talks Loom

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U.K. Prime Minister Theresa May’s stunning electoral setback Thursday left her Brexit strategy in a shambles less than two weeks before the start of talks with the European Union.

While the premier promised to plow ahead, her loss of 12 seats in the House of Commons weakened her negotiating position and invited scorn from political leaders across the English Channel. Complicating matters, her new governing partners from Northern Ireland, the Democratic Unionist Party, want to maintain a “frictionless border” with the Irish Republic.

U.K. Election: Follow our live results map and full coverage

Theresa May leaves the Conservative Party campaign headquarters on June 9.

Photographer: Chris Ratcliffe/Bloomberg

Read more about what’s next with the U.K. facing a hung Parliament

“Hard Brexit went in the rubbish bin,” former Conservative Chancellor of the Exchequer George Osborne, who campaigned to stay in the EU before being fired by May, said on ITV as the results came in. The Evening Standard, which he now edits, ran a front page with the headline “May Hung Out To Dry.” It was later switched to "Queen of Denial."

The election threw into question the form of Brexit voters want. May campaigned to remove the U.K. from the single market so she could regain control of immigration and law-making -- the so-called hard Brexit. She may now struggle to find majority support for that stance in the new parliament, although she gave no indication that she will change tack as she promised to “deliver the will of the British people.”

Her threat to walk away from the talks if provoked is now also diminished given Parliament might not endorse such a gambit. She may face immediate problems passing Brexit-related legislation like the Great Repeal Act.

“Evidently, the confidence of citizens that many things will get better and easier after leaving the EU is waning -- even among Brexit supporters,” Juergen Hardt, foreign-affairs spokesman for German Chancellor Angela Merkel’s parliamentary caucus, said in a statement.

The European Parliament’s Guy Verhofstadt said May had scored an “own goal."

Some in the Tory ranks will still urge May to maintain her push toward a hard Brexit and she might need to do so to keep them onside. That would leave May or her successor with less scope for horse-trading with the EU in return for a trade accord or post-Brexit transitional arrangement after the 2019 deadline to complete the process.

In a sign she plans to stick to her guns, May’s office said late on Friday that David Davis would stay as Brexit Secretary.

Pound Declines

The pound headed for its biggest decline in a year amid another bout of British political uncertainty and instability 12 months since the narrow vote to leave the EU. The Eurasia Group said the election result meant the likelihoods of a softer Brexit and no deal at all had both increased.

The EU and U.K. were already racing against the clock with an agreement needed by the end of 2018 so that their parliaments can rubber-stamp it. The two sides are also at odds over multiple matters ranging from how the talks will be structured to whether the U.K. should pay an exit fee. There’s also the issue of finding common ground on a complicated trade accord.

That threat and the rejuvenation of Jeremy Corbyn’s opposition Labour Party will intensify demands on the government to do more to preserve access to Britain’s biggest market than May was previously willing to.

About 44 percent of British goods and services flow to the EU tariff-free, but that link comes at the price of allowing free movement of EU workers into the country and letting the continent’s courts have a say in British laws. May balked at both.

“The prime minister called this election because she wanted to force through an extreme version of Brexit,” Labour’s shadow Brexit secretary Keir Starmer said. “It is clear already that she has failed in that endeavour."

Pro-Brexit politicians also sensed a shift. “The clean Brexit that everyone in UKIP hoped for is now in jeopardy,” said Patrick O’Flynn, who represents the U.K. Independence Party in the European Parliament. UKIP’s leader quit after failing to win any seats.

Finland’s Stubb says the U.K.’s negotiating hand has been weakened.

Source: Bloomberg

The prime minister will remain under pressure to stand down after calling an early election that ended up squandering a 10 seat majority in Parliament. If she hangs on, then she will make for a weakened negotiator given that she had declared that “every vote for the Conservatives will make me stronger” in Brussels. Her campaign also revealed a personal brittleness and willingness to reverse course when on the defensive, flaws the Europeans may seek to take advantage of.

The Negotiator: What the election tells us about May as Brexit nears

“Could be messy for the United Kingdom in the years ahead,” Carl Bildt, a former Swedish foreign minister, wrote on Twitter. “One mess risks following another. Price to be paid for lack of true leadership.”

A hung Parliament also runs the risk of another election midway through the talks, further squeezing the time available for them. One reason for May holding this week’s ballot was to delay another vote until 2022 and provide leeway to cut deals over money and citizens’ rights without the threat of a public backlash.

Deadline Stays

The EU is unlikely to extend the March 2019 deadline for fear of Brexit conflicting with regional elections later that year. European Commission President Jean-Claude Juncker said “the fact that the British democracy expressed itself the way it did yesterday has no influence at all on the cap.”

The election had been expected to effectively ratify the referendum with polls repeatedly showing that those who wanted to leave the EU still do so, and that many who voted to stay in it are now keen to get on with the withdrawal.

An early test of whether the anti-EU or pro-EU wings of the Tories will be in charge will be how the government addresses Europe’s demands to pay a financial settlement before leaving the bloc and how the talks are sequenced.

Mujtaba Rahman, managing director at Eurasia, said May could stage “a symbolic show of strength to show the EU and domestic doubters that she is still the self-styled ‘bloody difficult woman’ standing up for the U.K.”

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