The British Prime Minister, Mrs. Theresa May, was on a collision course with the European Union after MPs demanded on Wednesday she renegotiate a Brexit deal that the other members of the bloc said they would not reopen.
Less than two months before the UK is due by law to leave the EU on March 29, investors and allies are trying to gauge where the crisis will end up, with options including a disorderly Brexit, a delay to Brexit, or no Brexit at all.
Two weeks after voting down Mrs. May’s Brexit deal by the biggest margin of defeat for a government in modern British history, Parliament demanded she return to Brussels to replace the so-called Irish backstop, an insurance policy that aims to prevent a hard border between Ireland and Northern Ireland.
May said she would seek 'legally binding changes' to the divorce deal which she clinched in November with the EU after two years of tortuous negotiations. 'There is limited appetite for such a change in the EU and negotiating it will not be easy,' she told MPs who voted 317 votes to 301 to support the plan, which had the backing of Conservative MP, Mr. Graham Brady.
In essence, Mrs. May will try to use the implicit threat of a no-deal Brexit to clinch a deal from the other 27 members of the EU whose economy is, combined, about six times the size of the UK’s. The response from European capitals was blunt. France said there could be no renegotiation and demanded a 'credible' British proposal.
If Mrs. May cannot get a deal agreed, the default option would be to exit the EU abruptly with no deal at all, which businesses say would cause chaos. Diplomats and officials now think Britain’s exit will not be decided until the very last moment, though some also warn that the risk of a disorderly no-deal Brexit is rising. Both Mrs. May’s Conservatives and Opposition Labour Party are formally committed to carrying out Brexit but internally divided over how or even whether to do so.