No-deal Brexit edges closer as May reveals she doesn't want an indefinite backstop

Lianna Brinded
·Head of Yahoo Finance UK
·3-min read
Brexit divisions have sharpened over Irish backstop. Photo: Reuters
Brexit divisions have sharpened over Irish backstop. Photo: Reuters

Britain’s prime minister Theresa May revealed that the UK and European Union have come close to an agreement on the contentious issue of the Ireland border, but she’s not willing to agree to any deal that would keep Northern Ireland alone in the single market and the customs union.

“We’re in the final stages of negotiations. This is the time for cool, calm heads to prevail,” said May in a speech to a background of laughter and heckling in the House of Commons on Monday.

She said that there has been “a great deal of inaccurate speculation” about what has been going on within Brexit talks and said both sides have made real progress towards the withdrawal agreement and the future trade relationship.

May also claimed that the terms of the exit are clear and the structure of the final relationship was broadly agreed upon by the EU and the UK. However she said that there are two problems that they have been trying to resolve.

“Both the UK and the EU share a profound responsibility to ensure the preservation of the Belfast Good Friday Agreement, protecting the hard won peace and stability in Northern Ireland and ensuring that life continues essentially as it does now. We agree that our future economic partnership should provide for solutions to the unique circumstances in Northern Ireland in the long term,” she said.

She said that the EU proposed that it wants Northern Ireland to comply with single market regulation as well as the UK being in the customs union — known as a “backstop to a backstop.” May claims that this would not be allowed under the terms of the amendment to the customs bill passed in July and that she wouldn’t accept a backstop that would go on indefinitely.

“First, the EU says there is no time to work out the detail of this UK-wide solution in the next few weeks,” she said. “So even with the progress we have made, the EU still requires a ‘backstop to the backstop’ – effectively an insurance policy for the insurance policy. And they want this to be the Northern Ireland-only solution that they had previously proposed.

“We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom.”

READ MORE: ‘The moment of truth’ – a guide to Brexit’s biggest week

A backstop is an insurance policy or safety net that is intended to ensure there’s no hard border between Northern Ireland and the Republic of Ireland. The idea is that even if no formal deal can be reached by 29 March 2019, there will be no friction or change to day-to-day proceedings for the countries.

The EU and UK signed up to a basic version of this proposal in December last year but there have been 10 months of disagreements on how this would be implemented, invariably holding up talks.

READ MORE: A guide to why the Northern Irish border is a huge problem for Brexit

Economists are viewing a no-deal Brexit as becoming increasingly likely and have released several ultra-gloomy forecasts.

At the weekend, EY Item Club economists predicted that Britain’s economy is heading for its worst year in almost a decade after official figures revealed no growth in GDP in August. It predicted that the UK economy will grow just 1.3% in 2018, down from a previous 1.4% estimate, and downgraded the outlook for the second consecutive quarter.

The week before, the Office for Budget Responsibility (the government’s economic forecaster) warned that a no-deal Brexit would trigger border delays, which, in turn, could lead to companies and consumers stockpiling food and other supplies, including medicine.

However, one EU diplomat today said “I just listened in the car to what May said in the House of Commons and she didn’t sound too pessimistic. I think we are close but we still need some time. We are close probably on the Withdrawal Agreement, but on the future relationship there are still some things open so you probably need more time to do that.”

READ MORE: What is a no-deal Brexit? The key things you need to know