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U.K. Election Result Hinders May's Path to Brexit

11 Jun 2017 4:30 pm
By Simon Nixon 

First it was Austria, then the Netherlands, France and now the U.K.: The outcome of last week's election in Britain should be seen as the latest installment of the anti-populist backlash that has been sweeping Europe this year. As in those other elections, voters turned against narrow nationalism.

Prime Minister Theresa May's misjudged gamble in calling a snap general election failed because liberal voters in many of the most dynamic parts of England turned against her hard-line Brexit agenda.

She was only able to cling to power is because of a similar backlash in Scotland, where tactical voting by opponents of the Scottish Nationalist Party's plans for a second independence referendum gifted Mrs. May's Conservatives 12 Scottish seats.

Of course other factors were important. Mrs. May ran a dreadful campaign, her mirthless repetition of banal sound bites contrasting with the unexpected charisma of Labour's Jeremy Corbyn. Her manifesto also succeeded in alienating many of her target voters while Mr. Corbyn's extravagant promises to shower public money on popular causes appealed to voters tired of austerity.

But what sealed Mrs. May's fate was an average 7% swing to Labour in constituencies that backed remaining in the European Union in last June's referendum by more than 55%. Thus was delivered to Labour previously unimaginable victories in areas such as the wealthy London neighborhood of Kensington and the university town of Canterbury. An expected landslide for Mrs. May turned into a net loss of 28 seats.

What happens now to Brexit is anybody's guess.

Although the Conservatives lack a parliamentary majority, Mrs. May has been able to stay in office thanks to the promise of support from Northern Ireland's Democratic Unionist Party. But it is not clear whether this will be sufficient to deliver Brexit. Thanks to what now looks like a reckless decision to trigger Article 50 of the Lisbon Treaty just days before calling the general election, the clock is now counting down on the two years allowed to negotiate an exit deal. Yet with negotiations due to begin next week, Mrs. May finds herself without a mandate for her Brexit plan, which would take the U.K. out of the EU's single market and customs union and end the right of EU citizens to live in the U.K. As a result, she may struggle to secure the parliamentary support to deliver the highly contentious legislation -- known as the Great Repeal Bill -- needed to put in place the legal and regulatory frameworks to ensure British businesses can trade post-Brexit.

Even if Mrs. May no longer has a mandate to carry out her threat to crash out of the EU without an exit deal, there is still a risk that the U.K. ends up with a chaotic Brexit because it has been unable to negotiate a deal in what time remains or because it has been unable to put the necessary arrangements in place to cushion the impact. That has prompted some in the Conservative party -- including Scottish Conservative leader Ruth Davison who has emerged as a pivotal figure after the elections -- to talk of the need to build a cross-party consensus around a softer form of Brexit. This could involve the U.K. remaining inside the EU's single market and customs union, perhaps as a member of the European Economic Area, a looser alliance that includes Norway, Iceland and Liechtenstein.

Yet this EEA option would turn the U.K. from an EU rule-maker into a rule-taker, an unsatisfactory and likely unsustainable situation for an economy of the U.K.'s significance. The U.K. would be effectively obliged to continue to allow the free movement of EU citizens, respect the judgments of the European Court of Justice and pay into the EU budget, crossing all Mrs. May's red lines. It would also require the consent of both the EU and other EEA countries, which can't be guaranteed. If this version of Brexit had been on the ballot in the referendum, it would almost certainly have been rejected -- which is why it was rejected by the official Leave campaign. Yet it may now be the only version of Brexit that is politically deliverable in the time available.

The best bet is that Brexit still will go ahead, not least because both major parties committed to it in their manifestos. Still, it is possible for the first time since the referendum to imagine two scenarios in which Brexit doesn't happen.

Under the first, the political turmoil in the Conservative party -- caused by what appears to be an inevitable challenge to Mrs. May's leadership before the two years is up -- makes it impossible to negotiate a deal in the time available, prompting the U.K. to ask for a delay to the deadline. It is possible the EU might refuse under those circumstances, insisting instead that the U.K. withdraw its Article 50 notification. That would end the process until a new prime minister received a new mandate from parliament and the voters to restart it.

Under the second scenario, the Brexit process becomes so chaotic that the British political leaders conclude that the only way to hold the political parties together and secure the parliamentary support for the Great Repeal Bill is to agree to a second referendum on the terms of any Brexit deal. In today's political climate -- with the Tory Brexiters damaged, the economic consequences of Brexit becoming clearer as the U.K. economy slows and with the EU itself now debating wider reform -- it is just possible that a second vote would deliver a different result.

Write to Simon Nixon at simon.nixon@wsj.com

(END) Dow Jones Newswires

June 11, 2017 12:30 ET (16:30 GMT)

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