The referendum question for British voters in June 2016 was simple: whether to leave the European Union or remain in it. The answer has left the British government teetering on the verge of crisis.
On Friday, more than two years later, Prime Minister Theresa May and her allies were still trying to muster support for her controversial Brexit plan and fend off a possible challenge to her leadership.
A day after she lost two senior cabinet members, Environment Minister Michael Gove and three other prominent Brexit backers indicated they would stick by the prime minister. “A deal is better than no deal,” said one of them, Liam Fox.
That support has helped her fend off a brewing challenge to her leadership within the ranks of her own Conservative Party, with her opponents so far failing to build the necessary support to trigger a vote of no confidence in the prime minister. But the internecine battle within the Conservative Party over Mrs. May’s future hasn’t ended, foreshadowing the challenge she faces in getting her Brexit plan approved by a skeptical and deeply divided Parliament.
Those difficulties were in many ways prefigured on the day, more than two years ago, when a slim majority of British voters said “yes” to Brexit.
The 2016 referendum didn’t ask what kind of Brexit people wanted, so politicians were left to fill the gap. The ungainly compromise that resulted, released this week, has enraged both sides of the debate, sparking ministerial resignations and giving new wing to the effort to oust Mrs. May from power.
Her Brexit plan sees the U.K. bound to EU oversight after it leaves the trading bloc in March. In this transition period, the U.K. will have to apply EU rules in which it has no say while negotiating a new trade agreement with its European partners. If the trade deal can’t be sealed by the end of 2020, the U.K. would either extend the transition period for some years or fall into a loose customs union with the EU from which it can only extract itself with the EU’s blessing.
Euroskeptics are aghast, saying they wanted a quick exit from the EU so Britain can plow a new path, setting its own rules and striking trade deals around the world. Europhiles, meanwhile, say the outcome is far worse than simply staying in the EU, where at least Britain has a voice in policy-making.
Even Mrs. May says the draft agreement isn’t an easy pill to swallow. “Difficult and sometimes uncomfortable decisions have had to be made,” she said Thursday in Downing Street. “I understand fully that there are some who are unhappy with those compromises.”
The negotiations occurred against the backdrop of visceral infighting within Mrs. May’s party, a botched election that cost her government its parliamentary majority, and the decision to trigger the exit talks before deciding what the U.K. wanted to achieve. That meant that within weeks of the referendum result that shocked the EU, it was always the British who were caught on the back foot.
But at the heart of the problem is that the nature of the trade-off between sovereignty and economic continuity was never made plain during the referendum campaign—and hasn’t been clarified much by Mrs. May’s government since.
Did the British people prefer to stay close to their biggest trading partner to minimize the economic disruption of departure? Or did they prioritize the independence of the British government’s decision making, even if there was an associated economic cost?
Many pro-Brexit politicians claimed no such trade-off existed. They maintained that the desperation of German car makers and other European companies to sell their products to the U.K. would ensure the British could regain complete sovereignty while still enjoying the close trade relationship that exists now.
But the EU doesn’t work like that, and can’t. It is a unique construct in international affairs: a group of nations—28 now, soon 27—held together voluntarily by agreed laws, rules and precedents. Membership grants privileges and obligations, and the privileges aren’t available to countries that don’t wish to assume the obligations.
Soon after she became prime minister, Mrs. May interpreted the Brexit vote in its starkest form. Britain needed to take back control; EU workers’ freedom to move to the U.K. would have to stop; the jurisdiction of the European Court of Justice inside the U.K. must end. Her failure to understand the EU’s negotiating position, combined with the infighting in the Conservative Party, led Mrs. May to make a number of miscalculations.
Mrs. May’s laying out of her red lines in a speech in October 2016 is widely viewed as one of her original sins, hemming in the U.K.’s negotiating position in the subsequent two years. The second error was triggering the two-year notice period for leaving the EU in March 2017, without having first fixed a negotiating strategy.
The EU took a hard line in response: If the U.K. didn’t want the obligation of freedom of movement, it wouldn’t get the benefits of single-market membership, and couldn’t achieve those benefits by other means.
The U.K. sought a series of arrangements in which one side would recognize the other’s regulatory systems as equivalent, with the view of delivering frictionless trade. The EU saw that approach as effectively ceding to U.K. regulators decisions on what products or services would be allowed to enter the EU. The bloc wasn’t going to let the U.K. act as a loosely guarded back door to its trading area, effectively gaining a better deal outside the single marketthan it could on the inside.
U.K. needed transitional arrangements to soften the blow a sudden Brexit would bring. A comprehensive free-trade deal with the EU, and a host of other economic arrangements covering industries including aviation, nuclear, pharmaceuticals, transportation and hundreds more, couldn’t be done in short order.
Mrs. May postponed her decision over what future relationship she wanted with the EU until July of this year, when there was just nine months to go. If she had brought those ideas to the table earlier, officials say the EU’s red lines might have come under more sustained pressure. As it was, the ticking clock was a powerful negotiating tool for the EU.
The British negotiating stance was also plagued by an issue no other member state would confront: a border in Ireland that had been the flashpoint for a two-decade conflict that ended only in 1998.
In December 2018, Mrs. May agreed with the EU there should be no physical border on Ireland post-Brexit. The resulting compromise, which gives the bloc a definitive say in how Northern Ireland relates with Ireland, set up another conflict inside her party and with the Northern Irish party she depends on for her majority in Parliament—thanks to her ill-judged decision to call an election last year.
With the Brexit deal now finally made public, Mrs. May went on the offensive Friday, making a series of media appearances to win support for the agreement. Her central argument: This deal, for all its imperfections, must go through if Britain is to avoid massive economic disruption if it crashes out of the bloc without an agreement in March next year.
With that prospect in mind, corporate heavyweights including BAE Systems PLC expressed public support for the Brexit plan, as did the Confederation of British Industry, a major employers’ lobby group. But the support she most needs is in Parliament, where about 20 Conservative lawmakers this week have announced they have submitted letters calling for Mrs. May to go.
The government hasn’t said when it will present its Brexit bill to Parliament.
—Jason Douglas and Paul Hannon contributed to this article.
Write to Stephen Fidler at stephen.fidler@wsj.com and Max Colchester at max.colchester@wsj.com
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