While EU opposition to the Prime Minister’s ‘Chequers plan’ was well known, the language used in Salzburg was harsher than expected. This may be down to Mrs May’s own personality. She has none of the easy, persuasive charm of Tony Blair or David Cameron. Even Margaret Thatcher’s doggedness in negotiations was tempered with a softer approach to winning friends including the French socialist president, Francois Mitterrand.

Her performance at the pre-Council dinner and an article in the German broadsheet, Die Welt, were both blunter than they needed to be. So the EU decided to mark its negotiating territory more firmly than had been expected.

In terms of substance, little has changed. From the beginning the EU has said the UK can either adopt the Norway model (in the single market, accepting the rules, paying money and abiding by the four principles); or the Canada model (outside the single market, no rules, little money, and free trade).

Theresa May has meanwhile been on a journey. While she has continually said that Britain wants a bespoke deal securing the best of both these worlds, her Chequers plan appeared to be part of a gradual movement away from Canada towards something closer to Norway. Yet it was not enough to secure agreement from the EU, who still regarded her proposals as too much ‘cherry picking’.

The bluntness of their rejection puts Mrs May in a seriously weakened position. It has eroded trust among Tory MPs – even among previous loyalists – in her judgement and capacity to secure a deal. The atmospherics of Conservative Party Conference, in just over a week’s time, will now be much more hostile. Talk of a leadership challenge may be amplified in the coming days and next week’s cabinet meeting could see her put under serious pressure to ‘chuck Chequers’ from her more militant Eurosceptics, and revert to the pursuit of a Canada-style free trade agreement.

But the problem for Mrs May is that a Canada-style deal would not, on its own, solve the problem of the Irish border, which remains the central sticking point to a Withdrawal Agreement. She is not prepared to fracture the Union by carving out substantially different arrangements for Northern Ireland, in the way that the EU’s backstop position implies.

For now, despite the brutal rejection yesterday, she is unlikely to budge from Chequers. The line will be that the negotiation was always going to be tough and the Salzburg reaction is all part of the EU theatrics. However, she suggested yesterday that she will bring forward new proposals to deal with the Irish border ‘shortly’ – which suggests a further movement is coming.  Her challenge – an enormous one – is finding a solution that can win EU approval whilst securing the integrity of the UK, without undermining her political position at home.

In that, she faces an uphill task. The political arena is increasingly volatile while the business community is becoming ever more alarmed. The prospect of a crash out scenario does seem to have increased. Yet the fact remains that both negotiating sides want a deal, which means a deal is still the most likely outcome. That will only change if Theresa May is removed as Conservative leader and, despite the current turbulence, there remain many obstacles to that.

By Lexington’s Partner Mike Craven and Director Declan McHugh 
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