As the smoke clears on the prime minister’s 11th-hour EU deal, it is becoming apparent that there are still more questions than answers

‘They can smell a rat. But they are keeping quiet for now because they are not yet sure which rat it is they can smell.” At the end of a week that began with humiliation for Theresa May but ended with much of the British press hailing her as a hero, this was how one UK diplomat summed up the muted reactions of Brexit-supporting MPs to the deal struck by the prime minister on Friday.

Was it the triumph that rightwing papers and cabinet ministers were claiming? Or was it, as they suspected, a sell-out that would be exposed as such in the coming days and weeks? No one was quite sure.

May had dashed to Brussels in the early hours of Friday and signed off an agreement that had seemed unachievable four days earlier. She had left the Belgian capital on Monday with nothing, forlorn and seemingly politically broken. The DUP, on whom she relies for a parliamentary majority, had ruthlessly pulled the plug. Arlene Foster, the party’s leader, rang May during a lengthy and late lunch with EU Commission president Jean-Claude Juncker to say the proposals May was ready to sign off on the Irish border issue were unacceptable.

Quick guide What are Brexit options now? Four scenarios Show Hide Staying in the single market and customs union The UK could sign up to all the EU’s rules and regulations, staying in the single market – which provides free movement of goods, services and people – and the customs union, in which EU members agree tariffs on external states. Freedom of movement would continue and the UK would keep paying into the Brussels pot. We would continue to have unfettered access to EU trade, but the pledge to “take back control” of laws, borders and money would not have been fulfilled. This is an unlikely outcome and one that may be possible only by reversing the Brexit decision, after a second referendum or election. The Norway model Britain could follow Norway, which is in the single market, is subject to freedom of movement rules and pays a fee to Brussels – but is outside the customs union. That combination would tie Britain to EU regulations but allow it to sign trade deals of its own. A “Norway-minus” deal is more likely. That would see the UK leave the single market and customs union and end free movement of people. But Britain would align its rules and regulations with Brussels, hoping this would allow a greater degree of market access. The UK would still be subject to EU rules. The Canada deal A comprehensive trade deal like the one handed to Canada would help British traders, as it would lower or eliminate tariffs. But there would be little on offer for the UK services industry. It is a bad outcome for financial services. Such a deal would leave Britain free to diverge from EU rules and regulations but that in turn would lead to border checks and the rise of other “non-tariff barriers” to trade. It would leave Britain free to forge new trade deals with other nations. Many in Brussels see this as a likely outcome, based on Theresa May’s direction so far. No deal Britain leaves with no trade deal, meaning that all trade is governed by World Trade Organization rules. Tariffs would be high, queues at the border long and the Irish border issue severe. In the short term, British aircraft might be unable to fly to some European destinations. The UK would quickly need to establish bilateral agreements to deal with the consequences, but the country would be free to take whatever future direction it wishes. It may need to deregulate to attract international business – a very different future and a lot of disruption.

In one devastating act, the DUP had both cruelly exposed the fragility of the prime minister’s grip on Downing Street and put the entire Brexit negotiating process in grave peril, right up against the EU’s deadline. But then, as if by magic and to everyone’s surprise, Tory MPs awoke on Friday to declarations of a new dawn. Humpty Dumpty had been put back together again.

Where there had been deadlock, now there was a path to a negotiated deal on the UK’s exit from the EU. The Irish issue had been solved. An agreement had been struck on money and EU citizens.

All the sticking points were unstuck. Michael Gove, the Brexit-supporting cabinet minister, went on the BBC’s Today programme to say just that, heaping unrestrained praise on May for her brilliant negotiating skills. The environment secretary, who led the Vote Leave campaign, declared May had “won” and could be proud of a “significant personal achievement”. He appeared to have locked himself into the deal before the ink had dried.

Boris Johnson quickly came in behind May too. “Congratulations to PM for her determination in getting today’s deal,” he said. “We now aim to forge a deep and special partnership with our European friends and allies while remaining true to the referendum result – taking back control of our laws, money and borders for the whole of the UK.”

May had won a reprieve among many in her party. “The mess happened earlier in the week,” said one former cabinet minister. “It was a fuck-up over the Irish border, but in terms of recoveries, it’s not a bad one. She has some breathing space. She would have been in very big trouble had talks failed. She deserves a bit of slack now and I think she will get it.”

Tory backbenchers who have followed every twist and turn of the EU debate – some of them over decades – were slower to go public in support. The EU had indeed agreed to move talks on to trade, but at what price for Brexit? Was Johnson right to speak of taking back control of our money and laws when under this deal the UK had signed away about £40bn to the EU (money Johnson had once said the EU could “go whistle” for) and agreed that the hated European Court of Justice (always the Brexiters’ thickest of red lines) would after all be allowed to play a role for eight years in disputes involving EU citizens resident in the UK and UK ones resident in the EU?

Then there was the most ambiguous but potentially most far-reaching part of the agreement, which talked of the possibility of “regulatory alignment” between the Republic of Ireland and the UK in the event that no deal, including on the border between north and south, could be agreed. Did this not imply that the whole of the UK would, in that case, continue to abide by EU rules, under ECJ oversight, and operate as if it was still inside the customs union and the single market?

While the Daily Mail proclaimed “Rejoice! We’re on our way”, doubts were growing among Brexiters. Tory commentator Tim Montgomerie made clear he thought the deal was a betrayal of pure Brexit and what the people had voted for. The former cabinet minister John Redwood said “no deal” could well be cheaper and better than this one.

One Conservative donor warned the agreement was an attempt to deliver soft Brexit by the back door. He said it was time for Brexiters such as Johnson to take a stand by walking out of the cabinet. “It looks like the EU with its cunning Irish manoeuvre has flushed out our soft Brexit PM,” he said. “Interesting to see what Boris does now. What price principles? Or red lines?”

Yesterday the doyen of Tory commentary and the Brexit cause, Charles Moore, who has always had an open line to the likes of Iain Duncan Smith, Redwood, and Bernard Jenkin, wrote in his Daily Telegraph column: “I apologise for sounding negative about poor Mrs May’s efforts, but it seems worth speaking up. This is a moment when sceptical MPs – frightened of seeming disloyal – are pretending to be happy. I know they are not – and the same applies to millions of people across the country.”

Gove, in the same paper, perhaps aware he had oversold the deal at breakfast, was also giving himself a get-out clause. He suggested May’s great achievement was not set in stone and that if the electorate disliked it they could dump it later.

The pro-Brexit right of the party was having doubts and the consensus behind the deal was in danger of fracturing. To go from disaster on Monday night to Brexit delight on Friday morning had always seemed too good to be true, and to some Brexiters that was what it increasingly seemed to be.

Facebook Twitter Pinterest Former Tory minister John Redwood said ‘no deal’ would be better than the one May secured. Photograph: Alamy Stock Photo

It was shortly before 5pm on Monday when word came through to diplomats in a dimly lit negotiating room in the European council headquarters in Brussels that they might as well go home. They’d been cooped up for two hours, waiting for May and Juncker to sign off on a deal that would allow them to move talks on to trade. But there had been a hitch; a big one. Foster had phoned the prime minister to say she could not accept what the proposed agreement said about regulatory alignment with the Republic of Ireland after Brexit.

“That’s it, I quit,” exclaimed one senior diplomat heavily involved in organising the EU’s position, on hearing the news. “I’m going to the Caribbean. Why are we bothering?” It was a clear sign of the frustrations boiling over in negotiations.

May had no option but to leave Brussels with her tail between her legs, facing the real prospect that a Brexit deal had been scuppered, perhaps for good. Tory MPs privately questioned if she could carry on, while Labour taunted her for leading a government that had lost all credibility.

The impression of chaos grew in the middle of the week when Brexit secretary David Davis appeared before the Brexit select committee and admitted the impact assessments of leaving the EU did not, in fact, exist.

That same day, the chancellor, Phillip Hammond, told stunned MPs on the Treasury select committee the cabinet had not yet discussed an end destination for the Brexit negotiations.

With the sense growing that Brexit talks were going nowhere fast, Tory MPs on the right of the party, such as Redwood, began openly making the case for leaving with no deal.

But May was not giving up – and neither was the EU. As staff in Downing Street enjoyed their Christmas party on Thursday evening, she was on the phone to Foster. Late into the night and on through early Friday morning, senior advisers thrashed out the final detail. May slept for just two hours before leaving Downing Street at 3.30am for a drive to RAF Northolt to take the short flight to Brussels.

Juncker and Donald Tusk, president of the European Council, had cleared their diaries to meet May on Thursday afternoon or evening, and throughout the day British officials believed the prime minister could be on her way. By 6.30pm in Brussels, however, ambassadors (the events of Monday all too familiar in their minds) had heard nothing. Tusk was becoming increasingly concerned that the deal was falling away again.

The anxiety was that Downing Street still didn’t understand the tightness of the EU’s deadline. Tusk had been told by member states that Monday had been the latest they could possibly have an agreement with the UK, before this week’s European Council summit. It had taken intense discussions for that deadline to be pushed back to Friday. If nothing materialised now, it really was all over.

There was also a lurking fear in the corridors Brussels that if the worst happened, it might lead to a Boris Johnson premiership.

This weekend, despite the doubts and scepticism in many quarters, there are at least a few certainties. Theresa May is in a much better place than she was at the start of the week. Her job is no longer in immediate peril. But British diplomats and MPs know the deal done was deliberately opaque on many key issues, particularly the question of the Irish border, and that in many ways the real arguments have merely been postponed.

One said: “Everyone in the EU and on the British side knew they had to move forward. For the prime minister, there was the threat from UK business to take jobs abroad weighing on her more than anything else. For the EU, too, it was vital to move on. What they came up with is a deal that was deliberately vague so that all sides could put whatever construction they wanted on it, and sell it as a success.”

May will make a statement to MPs tomorrow and by then the deal will have been more thoroughly examined. Concern is growing in the business community that an agreement on a two-year transition, during which the UK stays close to the single market, must have legal force. But EU insiders say this will not be possible until the final withdrawal deal is done next year.

What do you think of the Brexit deal so far? Read more

Paul Drechsler, president of the CBI, said: “They have made significant progress but they have not agreed the transition. We need agreement on transition, the terms of it and the duration of it. That is what enables companies to suspend the execution of contingency plans. Every day that we don’t have that agreement and clarity, there is a negative impact on the UK. The clock is ticking. Decisions are being made. People are being reassigned. Investments are being relocated.”

Others believe it could be too late already. One City executive said: “I’m increasingly coming to the view that Europe will not give us a deal on financial services or anything worthwhile.”

Lord Kerr, the crossbench peer who drafted article 50, said last week that extending the transition period beyond two years may very well be deemed illegal under EU law. However, he is among those who believe a trade deal will take longer than that to complete, raising the prospect of a period in which the UK would have to trade under basic World Trade Organisation rules and significant tariffs.

One UK diplomat said a free trade deal between the UK and EU, similar to that with Canada and excluding services, was all that would be on offer from the EU but would not be ready until 2024 at the earliest. “This would mean we need a transition to last to then, accepting the full EU aquis [body of law]. That would not be popular with the Brexiters but that is the reality of the situation.”

Charles Grant, director of the Centre for European Reform, said: “It suits both the UK government and the EU to pretend that the transition will last only about two years. In fact – as officials on both sides will admit in their more candid moments – it will have to be much longer. Building the border infrastructure at Channel ports will take several years, as will the new IT systems required for customs and registering EU immigrants. Above all, the negotiation of the future relationship – covering trade, research, security, defence and foreign policy – will take at least five years. So any attempt to limit the transition to two years would lead to a cliff-edge – of Britain leaving the single market without new arrangements being in place.”

The question of how close the UK stays to the single market and what degree of “alignment” it chooses to accept has still not been confronted. That will have to be an issue for a cabinet meeting before Christmas, at which the “end destination” will be discussed.

If the UK wants a large slice of the single market it will have to accept ECJ oversight, free movement, and regular payments to the EU budget in return. One EU source said the first negotiations were just the hors d’oeuvre – “The attitude in Europe is going to be, if you thought that was hard, you ain’t seen nothing yet.”

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Senior Tories believe that when these issues have to be resolved, there is a serious chance not just of cabinet resignations but of pro-Brexiters leaving the party should May opt for the “soft Brexit” option in order to ensure maximum market access. One Tory veteran said: “Clearly, there are differences of views between those who want access and are happy to be rule takers, and those who want much less access and be rule makers. The PM is going to have to decide. There could be a group of people who will say, we are just not going to put up with this. How many? That’s a question mark.”

The Brexit process moves on but as it does so it will become ever more difficult to fudge the many fundamental questions that have been left unanswered over recent days, as the price for keeping the show on the road. May’s respite is likely to be short lived.

One Tory summed it up like this. “I think we need a pause now. Certainly members of the public I meet have had enough of Brexit. They just want us to get on with it and for everyone to go away for Christmas. Then it can all start up again afterwards. And rest assured, it will.”