Leaks, infighting and brazen displays of ambition at the top of the British government have obscured an important shift in the politics of Brexit in recent weeks. Sources close to the cabinet report that ministers are moving towards chancellor of the exchequer Philip Hammond's approach, which prioritises the economy over issues such as immigration.
Brexit secretary David Davis is increasingly aligned with Hammond, acknowledging the need for a transitional arrangement after Britain leaves the EU and admitting publicly that London will have to pay a divorce bill. Hammond leads a group of pragmatists in the cabinet, which includes other ministers whose briefs bring them into regular contact with business.
At the other end of the ideological spectrum is a diehard group including environment secretary Michael Gove, international trade secretary Liam Fox, foreign secretary Boris Johnson and international development secretary Priti Patel. Theresa May remains to the right of Hammond, with whom she has a spiky relationship, but her position is closer to his than to that of the hardest Brexiteers.
Fox said on Thursday that he was relaxed about the prospect of a transitional arrangement – although he was not relaxed enough to use those words, calling it an “implementation period” instead. The media have focused on disagreements over the length of a transitional arrangement but its duration is much less important than the nature of it.
British business wants early confirmation that there will be a transitional arrangement and it wants that arrangement to replicate the status quo. Companies are already unhappy about the cost and effort of preparing for the change from EU membership to life outside and making the change in two stages would be twice as costly.
A transitional deal that satisfies business would mean Britain remaining in the single market and the customs union and under the jurisdiction of the European Court of Justice (ECJ) for a few years after it leaves the EU in 2019. For many senior Conservatives, including the prime minister, Brexit is not Brexit unless Britain leaves those three institutions. For them, remaining in the single market without influencing its decisions would reduce Britain to a “rule-taker” or even a “colony” of the EU.
In the House of Commons on Wednesday, May appeared to suggest that Britain would be outside the single market during a transitional period.
"We said we would no longer be members of the single market because we will no longer be members of the European Union. When we have, at the end of the two years, negotiated the end-state deal [between the UK and the EU], there will then be an implementation period for that deal. But we're very clear that at the point at which we reach the end of those negotiations we will be out of the European Union," she said.
The other area of disagreement in cabinet is over the prospect of leaving the EU without a deal, which Hammond has described as “a very, very bad outcome”, but Fox says Britain would survive. May’s official position is that “no deal is better than a bad deal” but a leading group of British academic experts on the EU concluded this week that leaving without a deal would be disastrous for Britain.
"Our findings show a chaotic Brexit would, at least in the short term, spawn a political mess, a legal morass and an economic disaster. This report makes it clear 'no deal' is an outcome the British government must strive to avoid," said Anand Menon, director of UK in a Changing Europe.
Leaving with no deal would have serious consequences for Northern Ireland, with a return to a hard Border all but inevitable. The British and Irish governments both reject the idea of a hard Border but they disagree fundamentally about how to avoid it.
Britain believes that technological solutions, including cameras and advance, online customs clearance, can make the Border “frictionless” after Britain leaves the customs union. Irish negotiators are sceptical about such technology, arguing that more creative and ambitious solutions are necessary if major disruption to Border communities is to be avoided.
One idea is to extend the area of the EU customs union to include Northern Ireland, effectively moving the customs border away from the land frontier to the Irish Sea. Policing air- and seaports is easier than attempting to monitor a porous land border but a barrier between Northern Ireland and Britain is unacceptable to the DUP, on whom May depends for her government’s survival.