(Bloomberg) -- The Brexit Party's victory in European elections has lit a fire under the Conservative leadership race, with candidates vying to show how willing they are to rip the U.K. out of the bloc without a deal.
As leadership rivals pledge that Oct. 31 will be the final deadline, markets are taking fright. But getting to no-deal isn't that simple. Here's what you need to know:
1. Tories Choosing Next PM Want No-Deal
The next prime minister is going to be chosen by the 120,000 members of the Conservative Party. Members of Parliament whittle down the candidates to a final two and that shortlist goes to the activists to choose a winner. Two-thirds of those members want a no-deal Brexit, according to a poll by YouGov.
2. Parliament Opposes No-Deal
A majority of members of Parliament are against no-deal (the split was 160 MPs vs 400 in a vote on March 27). But there's not a clear mechanism for them to prevent it happening, according to the Institute for Government. A determined leader could find a way to bring about no-deal, though it might be constitutionally questionable and members of Parliament could well find a way to prevent it.
3. No-deal Could Trigger Election
One way Parliament could stop a no-deal is with a vote of no-confidence in the government. The Conservatives don't have a majority so it wouldn't require many Tory MPs to take a stand for the government to be defeated. A Brexiteer hardliner as prime minister would be a divisive leader of the party -- making rebellions more likely. Chancellor of the Exchequer Philip Hammond, a pro-EU Conservative, has refused to rule out voting against his own government in order to prevent no-deal.
4. Thwarted PM Could Call Referendum
A new prime minister blocked by Parliament from pursuing a no-deal exit and reluctant to risk defeat in a general election could call a plebiscite instead.
Or he or she could be forced into one. Labour's Jeremy Corbyn, who has long said he would back a referendum to avoid no-deal, is looking increasingly willing to push for one. His finance spokesman John McDonnell says it's now the only way to stop a chaotic exit that would destroy jobs. The results of the European elections also showed that more people voted for a second referendum than for no-deal -- these numbers strengthen the case to resist a messy break-up. Last time Parliament voted on a confirmatory referendum the idea was rejected by a margin of 292-280; if no-deal was the alternative, the number in favor of a public vote is likely to increase.
5. No-Deal Might Hurt Too Much
The EU says that in a no-deal scenario it wouldn't cut a trade deal with the U.K. until the bits that have proved most controversial -- the Irish border and the divorce bill -- are settled. That suggests that if the U.K. is unwilling to compromise on the contentious issue of the Irish border, it would have to endure the shock of functioning without a trade deal with its biggest neighbor. Factories would close, jobs would be lost and consumers would face goods shortages and higher prices. The EU expects the U.K. would soon return to the negotiating table.
To contact the reporter on this story: Emma Ross-Thomas in London at erossthomas@bloomberg.net
To contact the editors responsible for this story: David Merritt at dmerritt1@bloomberg.net, Tim Ross
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