European leaders throw cliff-edge Britain a Brexit lifeline

A summit of the 27 European Union leaders on Friday (AEDT) agreed that if Mrs May can pass her Brexit deal next week, Britain's withdrawal will take place on May 22.

If she can't, the new cliff-edge is April 12, when she will have to decide whether to crash out of the EU with no deal or else signal some other "way forward" for Brexit, paving the way for a much longer "Brextension" of a year or more.

"The cliff-edge date will be delayed. The UK government will still have a choice of a deal, no deal, a long extension or revoking Article 50," said European Council President Donald Tusk.

Mrs May's chances of passing her deal at the third time of asking next week do not look promising. After she bitterly rounded on MPs of all stripes in a public address on Wednesday night (Thursday morning AEDT), accusing them of indulgence and navel-gazing, she looks to have alienated many who were considering backing her.

On Friday she was more emollient, saying she understood MPs' frustration, but added "I hope we all agree we are now at the moment of decision".

She told reporters the EU summit outcome "underlines the importance of the House of Commons passing a Brexit deal next week so that we can bring an end to the uncertainty and leave in a smooth and orderly fashion".

She has been using the implicit threat that if MPs don't back her deal then Britain will crash out of the EU with no deal.

But nobody is certain whether she will make good on that threat, or baulk at the huge economic and political disruption of a no-deal Brexit.

The EU leaders said contingency planning for "all possible outcomes" of Brexit should continue.

If Mrs May looks set to try to leave without a deal, Britain's Parliament may try to bind her hands and demand a much longer delay to Brexit.

The EU leaders have left open that possibility, as long as British MPs set out a clear plan for changing course towards an alternative version of Brexit.

A longer delay means Britain would have to participate in European Parliament elections, which will be politically hard to swallow. Mrs May on Friday emphatically reiterated her opposition to this.

Labour leader Jeremy Corbyn travelled to Brussels late on Thursday (AEDT) for talks with EU leaders, as he tries to marshall a parliamentary majority for a Brexit that keeps Britain much more closely aligned to the EU.

"We do believe we can construct a majority which will prevent the crashing out and all the chaos that will come from crashing out, and that is what we are absolutely focusing on," he told reporters in Brussels.

There's no parliamentary majority for his "soft Brexit" plan yet, but some europhile Conservatives support it. Mr Corbyn needs to win over those on his own side who would rather have a second referendum than an alternative Brexit deal.

"We will probably on the day be able to get a cross-party parliamentary majority in favour of what is sometimes called 'Norway Plus' and sometimes called 'Common Market 2.0'," europhile Conservative MP and former cabinet minister Sir Oliver Letwin told the BBC.

"[That] is an arrangement where we remain in the single market and we have a customs arrangement with the EU, and that has not yet been tested [by a vote in parliament]."

Foreign Secretary Jeremy Hunt seemed to anticipate MPs taking this option, telling the BBC that "in a hung parliament MPs actually have to make decisions, because governments cannot decide things on their own".

If Parliament does actually wrest control in coming weeks and seeks a longer delay, Mrs May could potentially quit as Prime Minister, deepening the political chaos and uncertainty.

The Bank of England on Thursday (AEDT) said Britain's economic outlook hinged on the future relationship with the EU and whether the Brexit transition was abrupt or smooth.

"Shifting expectations about the potential nature and timing of the United Kingdom's withdrawal from the European Union have continued to generate volatility in UK asset prices, particularly the sterling exchange rate," the bank said in its monthly monetary policy statement.

"Brexit uncertainties also continue to weigh on confidence and short-term economic activity, notably business investment."

The economy's trajectory - and decisions on interest rates - would depend on how households, businesses and financial markets responded to Brexit. "The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction."