There are different options on the table to fix the border issue, but the EU’s negotiator Michel Barnier suggested Wednesday that to avoid a physical border between both sides of the island, Northern Ireland will still be part of the EU’s single market (a region where goods, people and services move freely).
But this plan might raise problems for May at home. The unionist party in Northern Ireland, the Democratic Unionist Party (the DUP), who back May in Parliament and give her the necessary majority she needs to approve any Brexit deal, are against the idea of putting any sort of barrier that divides Northern Ireland from the rest of the U.K.
“We expect the withdrawal agreement to be completed by November, but the risk of a ‘no deal’ will remain high owing to the possibility that it does not survive the ratification process,” Danielle Haralambous, a U.K. analyst at the Economist Intelligence Unit, told CNBC via email.
Once negotiators conclude the Withdrawal Agreement and EU leaders are happy with it — which would take place in mid-November — this deal needs to be approved by the European and U.K. Parliaments, the so-called ratification process.
“In the U.K. parliament, pro-Brexit members of the government are unhappy with the direction in which Mrs May is taking Brexit, while Labour MPs (members of Parliament) have declared their intention to vote against the deal,” Haralambous noted.
“There is a significant risk that MPs on both sides of the Brexit divide vote against the withdrawal agreement and seek a general election,” she added.
Members of the DUP have threatened to vote against the government’s budget plan for next year, if the U.K. prime minister does not respect the DUP’s “red lines” in the Brexit process.
This could potentially bring down the government as it would signal that the deal between the Conservatives and the DUP would no longer be in place.
If negotiators are successful in finding a solution for the Irish issue next week, sterling could move higher. The currency has been volatile to the ongoing Brexit noise, having risen 0.5 percent to $1.32 against the dollar on Barnier’s remarks this week.