May survives but the future of Brexit remains foggy

Theresa May ultimately prevailed in the no-confidence motion that was called against her by prominent Brexiteers, albeit by a margin that shortens her time as PM greatly.

What has changed, some people might ask. Well quite a lot, actually. There is no prospect of another challenge to the incumbent PM for another year, under Conservative Party rules. That means PM May is secure, free to finish off the arduous, gruelling and thankless task of negotiating a deal that satisfies every side. In reality, there is no such deal to be had because leaving the EU is fraught with macroeconomic and geopolitical risk. Any deal she puts forward is going to be suboptimal because of the complexity of the tasks involved – particularly on ensuring British territorial integrity in Northern Ireland.

One thing that is unchanged is that Theresa May’s deal in its current form will be rejected by Parliament. That is almost a certainty. She has very little leeway left to try and renegotiate it, especially in view of the fact that the EU has explicitly ruled out any such renegotiation. To be realistic, the best that she can get is a minor tweak in the language of the text of the deal promising vague solutions to the issue of the Northern Ireland backstop. The backstop is hated by the Brexiteers, but they knew beforehand about the complexity and risks inherent in the Irish issue prior to the referendum and chose to ignore it. The last thing Britain needs is a new potential insurgency or border problem.

What happens if and when the deal is rejected in Parliament? The options to move Brexit forward – as Parliament is mandated to do by the Referendum result- are very limited. A General Election would almost certainly result in Jeremy Corbyn heading into No 10, something which generates trepidation even among many Labour supporters, let alone Tories. It would be akin to turkeys voting for Christmas for the Conservatives, one reason why there will be no move to dissolve Parliament. That makes one of two things more likely, either a no-deal Brexit or a new referendum. Neither is going to be good for Britain from a macroeconomic perspective.

A no deal Brexit means British competitiveness in the world of trade will be hit almost instantly as new barriers to EU trade, both tariff and non-tariff kick in. The British would be badly disadvantaged by this. There would be significant disruption, jobs losses, lower economic growth to a substantial and noticeable degree. A new referendum on the other hand means more division and uncertainty, with no clear outcome in sight. That leads to a third possibility, that Brexit could be cancelled altogether. Time will tell, soon enough.

Something which I think is notable is how the hard Brexit right insists that a 52-48 referendum outcome constitutes a powerful mandate then turn around and say that 200-117 in the Tory leadership vote is a failure. May is hobbled for sure, but she always was by the challenge of delivering Brexit. The whole idea that Britain could deregulate its way to higher growth is predicated on giant economies like China, Japan the US and India agreeing to trade deals outside with us outside the EU. This in itself is a risky and probably erroneous assumption. Britain trades more with Ireland than with either China or India. Ignoring our European neighbours is not an option.

A soft Brexit – essentially what May envisages – may be the only path going forward, reinforcing that the steely and patriotic Mrs May has had the right instinct all along.