Ignore the warm words about wanting the European Union to succeed; The key passage in Theresa May’s speech on Brexit on Tuesday was her declaration that “no deal is better than a bad deal.” In a single sentence, a scenario that only weeks ago was being widely dismissed as a low-probability risk is now the government’s official fallback plan if it doesn’t get what it wants from its exit negotiations with the EU.

The prospect of a chaotic Brexit is now one that needs to taken extremely seriously. The crucial question is what...