U.K. Prime Minister Theresa May returns to parliament Monday to report to lawmakers how she plans to take Britain out of the European Union in less than two months' time after her previous proposal suffered the biggest defeat in British political history.
May faces an exceedingly difficult challenge in marshaling support for any withdraw agreement from the European Union following the rejection of her painstakingly-negotiated plan last, which saw 432 members of the 650 seat chamber vote against it. With consensus evident for any of the options that remain -- including an extension of the March 29 deadline that was set two years ago -- May must now either win new concessions from Brussels or work with rivals from other political parties in order to break the deadlock.
"May seems to be making little progress in cobbling together a deliverable deal on Brexit. Her engagement with the opposition seems to have fallen on deaf ears and instead it looks like she's trying to win over the Tory Brexiteers again by trying to renegotiate the Irish back-stop," said ING's global head of strategy Chris Turner. "The market will doubt that the renegotiation of the Irish backstop is a path to an agreement and instead will be more interested in the various amendments that will be tabled through the early part of the week."
The pound was marked modestly higher against the U.S. dollar at 1.2871 by mid-day trading in London, extending a gain of more than 3% against the greenback since May reached her deal with the European Union in late November.
The sticking point for those who don't support May's deal centers around the border between Northern Ireland, a UK territory, and the Republic of Ireland, an EU member state.
May's Withdrawl Agreement, which was rejected last week, was really only the first half of Britain's Brexit process. It drew up terms of how the country should leave the bloc, but postponed talks on how the UK and the EU will trade with each other after the split.
If trade talks between the two sides should fail, a hard border would have to sit between the EU and the UK on the only land area that connects them: Northern Ireland. However, the 1998 Good Friday peace agreement, which ended decades of sectarian violence in the region known as 'The Troubles', forbids border checks between Northern Ireland and the Republic.
Ireland has said it will not negotiate individually with the UK on the Irish border issue, insisting talks must be lead by EU Commissioner Michel Barnier,
If no agreement on the border can be reached, Britain faces a choice of either remaining in the European Customs Union, which would replicate its current trade agreements but prevent it from signing new deals with other countries such as the United States, or leaving the EU without a bespoke trade deal with its biggest economic partner.
"Crashing out (of the EU without a deal) bring more than shivers, because I have examined in depth what might happen, I'm part of the government's plans for Breixt. I've seen what may well happen with this cut-off date," said U.K. Parliamentary Under-Secretary of State for Industry & Energy Richard Harrington. "in my view is an absolute disaster," It's not a road to a free trade agreement, it's not a road to anything."
"It's an absolute disaster for the country and it's supported by a minority of a minority of people," he said, adding he's resign from the government if May proposes such an option when parliamentary debate resumes on January 29.