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Anti-Brexit demonstrators lay out a sign demanding a second referendum outside Parliament as Theresa May announced a postponement of a crucial parliamentary vote on the Brexit agreement struck with EU leaders last month in London on Dec. 10, 2018.TOLGA AKMEN/AFP/Getty Images

The United Kingdom U.K. has moved closer to a chaotic departure from the European Union after Prime Minister Theresa May suffered a humiliating setback and had to withdraw her Brexit deal with the EU because it lacked support in Parliament.

The dramatic move came on Monday when Ms. May abruptly deferred a vote on the agreement in the House of Commons that was slated for Tuesday. She acknowledged that the deal would be “rejected by a significant margin” and pledged to head back to the EU to seek changes. She is scheduled to meet with German Chancellor Angela Merkel on Tuesday to discuss the concerns of British MPs. “I have listened very carefully to what has been said, in this chamber and out of it, by members from all sides,” Ms. May told MPs. She added that while most of the deal had broad support, a key provision had raised “widespread and deep concern.” The provision in question aims to avoid a hard border between Ireland and Northern Ireland, but many Tory MPs argued that it would keep the U.K., and especially Northern Ireland, closely bound to the EU for years.

It’s not clear how long the new negotiations will take, but they could drag on for at least several weeks. It’s also far from certain that the Prime Minister will be able to get enough concessions from the EU to win over her opponents and still meet the deadline for the U.K. United Kingdom to leave the bloc on March 29. Most of Ms. May’s toughest opposition comes from her Conservative Party caucus and on Monday, those MPs showed little sign of backing down, with some calling for Ms. May to resign. EU officials also expressed frustration at Monday’s manoeuvre and Donald Tusk, president of the European Council, which represents EU leaders, insisted the deal will not be renegotiated. Meanwhile, the value of the pound fell to its lowest level against the U.S. dollar in 18 months on Monday and stock markets across Europe fell by as much as 2 per cent.

Britain's Prime Minister Theresa May returns to Downing street after postponing a parliamentary vote on her Brexit deal in London on Dec. 10, 2018.BEN STANSALL/AFP/Getty Images

Ms. May faced withering criticism for the delay from MPs from all parties, with many shouting her down as she tried to explain the move during a nearly three-hour debate on Monday. “The government lost control of events and is in complete disarray,” said Labour Leader Jeremy Corbyn said, who is considering trying to force an election over the issue. “This is a bad deal for Britain, a bad deal for our economy and a bad deal for our democracy." In a series of heated exchanges in the House of Commons, Labour MP Yvette Cooper asked: “Does [Ms. May] not realize how chaotic and ridiculous this makes our country look?” Tory MP Andrew Bridgen said Ms. May had “lost the trusted credibility of the house.” Parliament will hold an emergency debate on Tuesday on the decision to defer the vote.

There was deep concern outside Westminster as well, particularly among business leaders who fear the U.K. will depart the EU without any arrangements governing trade or other matters. The EU is the U.K.’s largest trading partner, and many British business people fear that a no-deal Brexit will lead to tariff and non-tariff barriers, and cause delays at the border as sudden checks come into force. The delay in reaching a deal “is yet another blow for companies desperate for clarity,” said Carolyn Fairbairn, director-general of the Confederation of British Industry, the country’s largest business group. “Unless a deal is agreed quickly, the country risks sliding towards a national crisis.”

Ms. May faces an almost impossible challenge in finding a solution. The Brexit deal includes two parts; a 585-page withdrawal agreement and a 26-page framework for discussions on a future relationship. The problem for Ms. May is in the withdrawal agreement. It’s a legally binding document that outlines the terms of the U.K.’s exit and it covers a range of largely technical issues such as residency rights, visa requirements, intellectual property and the amount of money the U.K. must pay to cover its obligations. It also establishes a transition period lasting to the end of 2020. During that time, the U.K. would essentially remain in the EU and both sides would negotiate a broader agreement on their future relationship covering trade, security and several other issues. If a deal wasn’t struck by July, 2020, the deadline could be extended for up to two years. If a deal still wasn’t finalized, a “backstop” would kick in. Under the backstop, the U.K. would remain in a customs arrangement with the EU, governing the trade of goods, while the talks continued. Northern Ireland would be tied even closer to the EU to avoid a hard border with Ireland, something the U.K., EU and Ireland have agreed was important.

Many Tory MPs argue the backstop would defeat the objective of Brexit, and they are convinced the EU would extend the negotiations to ensure the backstop became inevitable. They also note that the U.K. could not unilaterally pull out of the arrangement and that the backstop has no time limit. Around 100 Tory MPs have said they won’t support the overall deal unless the backstop was scrapped or changed. "It would be transformative if the backstop were removed,” said Tory MP Jacob Rees-Mogg, who leads the Tory opposition to the deal. “But, this is the whole backstop, this isn’t some paragraph saying it will finish in 2025 or something. It has to be out, because no one would believe the 2025 date.”

Ms. May vowed to tackle the issue with the EU, and has hinted that the 26-page framework for future discussions could be changed to provide assurances about the backstop. That’s unlikely to be enough for her staunchest critics.

EU leaders are holding a two-day summit starting on Thursday, and Ms. May will press her case on the backstop. But so far, there’s little indication the EU is eager to accommodate her. On Monday, Irish Prime Minister Leo Varadkar said, “The withdrawal agreement, including the Irish backstop is the only agreement on the table. It’s not possible to reopen any aspect of that agreement without reopening all aspects.” Guy Verhofstadt, the European Parliament’s representative in the Brexit negotiations, expressed exasperation at Ms. May’s delay, saying on Twitter: “I can’t follow anymore.” He added, “After two years of negotiations, the Tory government wants to delay the vote. Just keep in mind that we will never let the Irish down. This delay will further aggravate the uncertainty for people & businesses. It’s time they make up their mind!”

There is one other option. On Monday, the European Court of Justice ruled that the U.K. can revoke its decision to trigger Article 50, the section of the Lisbon Treaty Ms. May invoked last year to begin the Brexit process. The court ruled the U.K. can effectively change its mind and return to the EU without the permission of other member states. Ms. May has insisted the country will be leaving the EU.

With files from Reuters