Britain is facing its biggest and most complex challenge since the end of World War II. With 10 months to go before the UK is due to leave the EU, British negotiators are in dire straits as warring interest groups grapple over different visions for a post-divorce UK.

Last year, when Jean-Claude Juncker, president of the European Commission was engaged in a spasm of grumpy irritation about the English, he proclaimed “Brexit cannot—must not—be a success”.

With only 10 months to run before the United Kingdom is due to leave the well-guarded European Union “club”—and pay approximately AUD$ 50 billion for doing so—Juncker may be proved right.

Whatever deal David Davis, the hapless UK Brexit Secretary, can negotiate with Michel Barnier, the point man for the 27 EU countries, it cannot possibly match what Britain is giving up: a leading role in the management of the world’s most powerful economic bloc, home to 530 million people, with a total GDP of USD$ 16.5 trillion (AUD$ 22 trillion), 23.6 per cent of the planet’s total.

It is not that Barnier has outwitted Davis, though there can be little doubt as to who is the better negotiator, but Davis started off with a poor set of cards and he now has none left.

Britain is facing its biggest and most complex challenge since the end of World War II. A weak and divided government seems unable to deal with what is essentially a triangular problem: nationalistic Tory diehards who want to cut Britain completely adrift of Europe; large and important sectors, including business, the public service, the Labour Opposition and trade unions, who want the UK at least to remain in the customs union (thereby avoiding border checks); and a third group who are unsure what they want and are bored with the debate.

At the heart of this is the prime minister, Theresa May, who voted “remain” in the referendum, but then repeated ad nauseam that the government had to respect the “will of the people”, even though the vote was only 52-48 and not binding on Parliament.  May started off insisting “Brexit means Brexit”, and that meant giving up being part of the lucrative single market despite its huge benefits to the UK economy. May was badly wounded by her decision to call an early election last year: the Tories lost a healthy majority and now depend for parliamentary survival on the votes of the centre-right Ulster Democratic Party.

Contest over customs

May has spent recent months trying to persuade warring factions in her Conservative Party to agree on what shape Brexit should take. Under the influence of Philip Hammond, Chancellor of the Exchequer (known as “spreadsheet Phil” for his addiction to worrying financial forecasts), May proposed a “customs arrangement” with the EU.

It was what Australians would call a “Claytons” of a Customs Union: a watered-down version whereby Britain could keep the bits of the EU it liked but not be bound by restrictions, such as the one preventing participants negotiating trade deals directly with non-EU countries. Under the proposed arrangement, Britain would collect tariffs from importers who use Britain as trans-shipment point into Europe and pass the cash to Brussels. So, for example, wine from the Barossa shipped to an EU port would be hit with the EU rate of duty, but merchants selling-on part of the shipment would be reclaim the duty for that portion.

The compromise was treated with contempt by May’s principal rival, Boris Johnson, who broke Cabinet confidentiality by telling the arch pro-Brexit newspaper, the Daily Mail, that it was “crazy”. May resisted demands from MPs and the media to sack Johnson, writing an article for The Sunday Times imploring her warring tribes to “trust her” and to support her plan.

So desperate has May become that she has formed two small study groups of cabinet ministers to examine in detail her proposed customs arrangement and another hi-tech plan billed MaxFac, short for “maximum facilitation”, which entrusts authorised traders to use technology to make customs declarations and pay duties. Neither EU officials nor UK Treasury like this idea.

Obstacles on the horizon

Even if Prime Minister May gets her way, there are formidable obstacles in coming days. Contrary to some reports, European Commission officials have no desire for Britain to crash out of the EU with no deal. Europe’s two most influential leaders, France’s president Emmanuel Macron and Germany’s chancellor Angela Merkel, would much rather Britain stay in full membership and have sent that message to Downing Street.

It’s not just that Britain’s financial contribution will leave a huge hole in the EU budget— though it would be considerably less than the £350 million a week canvassed by Boris Johnson during the referendum—but also that Britain, with Germany and France, form a troika of Europe’s biggest economies. Britain is also by far the leading contributor to European defence and, with France, is a nuclear power and a permanent member of the United Nations Security Council. In recent weeks the troika have shown unprecedented solidarity in dealing with unpredictable leaders including Russian president Vladimir Putin and maverick US president Donald Trump.

Curiously, the track record of the EU in presiding over 70 years of peace in Europe (barring one or two localised conflicts) has never featured in the Brexit debate. That debate has revolved round vacuous slogans on Boris Johnson’s Brexit campaign bus including “take back control”, “build Britain’s Glorious Global Future” and “end the EU £350 million a week and fund the NHS instead”.

The final obstacle which could prove decisive is the institution that has, through this and the 20^th Century, retained control over British affairs: the House of Commons. Despite Brexiteers’ slogans suggesting otherwise, it makes the laws, sends British soldiers to fight wars and fixes British taxes.

The government’s flagship EU Great Withdrawal Bill is currently passing through the House of Lords, where it has already suffered 14 defeats, the heaviest rejecting May’s desire to exit the Customs Union.

The majority of peers in the Lords favour remaining in the EU and last week they inflicted an even more serious blow on the government, voting by a majority of 29 to remain in the EU single market for both goods and services which binds participants to free movement of all citizens.

The bill will return to the House of Commons after the British summer holidays. Until recently it seemed likely to get a majority there, making the Lords’ amendments a temporary irritation. But now there may be a sufficient number of Tory rebels to support their lordships, which would mean a humiliating defeat for Mrs May, a rethink of government policy or a general election—or all three.

I leave the last word with Michael Bloomberg, founder and proprietor of the world’s leading financial news provider. Last week in a rare editorial he wrote: “Staying in the EU’s customs union, or some specially tailored version of it, would leave the UK with a worse deal than the one it currently enjoys as a full member of the EU. It’s come to something when such a dire and unpredictable prospect starts to look appealing.”

Colin Chapman is a writer, broadcaster and public speaker who specialises in geopolitics, international economics and global media issues. He is a past president of AIIA NSW and was recognised as a fellow of the AIIA in 2017. This is an edited version of his Fellow’s Presentation to AIIA VIC on 10 May.

This article is published under a Creative Commons Licence and may be republished with attribution.