Brexit talks on hold with British PM Theresa May's team in disagreement, sources say

Compromises by May (above) have sparked Cabinet arguments. PHOTO: EPA-EFE

LONDON (BLOOMBERG) - British Prime Minister Theresa May's Cabinet is not close enough to agreeing a way forward for top level Brexit negotiations to resume, even as time is running short to reach a deal, according to people familiar with the matter.

There will almost certainly be no new plan put forward by the British side before next Monday's budget, the annual statement setting out the government's tax and spending plans for the next year, one of the people said.

The assessment followed a stormy meeting of May's Cabinet on Tuesday, when two factions battled each other over the question of how to avoid customs checks at the Irish border without tying the UK into the European Union's trade regime forever.

A meeting that had been called to discuss the issue on Thursday was cancelled because agreement within May's team is still out of reach, according to a report in the Evening Standard newspaper.

Both Britain and the EU had hoped to finalise the terms of the divorce at a summit of national leaders last week in order to sign the overarching agreement - including an outline of the future relationship - at a special meeting in mid-November.

Instead, divisions within the British negotiating team meant a draft agreement was vetoed by May's ministers, notably Brexit Secretary Dominic Raab, the people said.

At the summit in Brussels, May offered further compromises, pledging to consider extending the transition period and to drop her demand for a strict end-date to the so-called backstop arrangement for the Irish border.

May's moves sparked arguments at Cabinet on Tuesday, as she lost control over the warring factions within her team. According to people familiar with the meeting, seven senior pro-Brexit ministers spoke out against a proposal that could allow the UK to stay inside the EU customs union indefinitely.

May was said to have reacted angrily before another group of ministers launched a counter attack and warned that the UK will crash out of the EU with no deal unless she is able to compromise.

On the other side of the negotiations, many member states now struggle to see how May can push any reasonable negotiated accord through Parliament, prompting them to focus on no-deal preparations, according to one European official.

"What is undoubted and certainly the case is the prospects for an agreement are very adversely effected by the political situation we now see in the UK," Irish Prime Minister Leo Varadkar said this week in Dublin.

According to May's office, negotiations are "ongoing" at a technical level between British and EU officials in Brussels. But there's no high level political involvement from Raab, the Brexit secretary, or his EU counterpart, Michel Barnier.

Brexit backers in May's Cabinet are demanding a legally binding mechanism to pull Britain out of any backstop arrangement on the Irish border that comes into force. They fear that the UK will stay tied in a customs union with the bloc indefinitely, preventing the country from striking new trade deals around the world - a key prize of Brexit for those who campaigned for it.

One option being mulled in London is to include a review clause in any backstop plan, one person said, speaking anonymously because the matter isn't public. This would mean that initially the backstop would keep the UK inside the customs union for a period of six months or one year.

That could be extended once, if either Britain or the EU decided it would help. But to extend it any further, both sides would need to agree, thereby giving the British government - and the EU - the option to pull the plug on the backstop unilaterally, under the draft plan.

It's not clear if the EU would be willing to consider the proposal.

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