The rejection of Theresa May’s Brexit deal will lead to “economic chaos”, Chancellor Philip Hammond warned as the Prime Minister travelled to Brussels for talks.
Mrs May will meet European Commission president Jean-Claude Juncker and European Council president Donald Tusk before a summit of EU leaders on Sunday which is expected to endorse the deal thrashed out between negotiators from the two sides.
Spanish Prime Minister Pedro Sanchez had threatened to boycott the European Council meeting without further guarantees for Madrid over the status of Gibraltar.
But a crisis was averted after a clarification about the position and emergency talks between Mr Sanchez, Mr Tusk and Mr Juncker.
A letter from the UK’s ambassador to the EU Sir Tim Barrow confirmed the Withdrawal Agreement imposes no obligations regarding the “territorial scope” of future agreements.
It also makes clear the UK will negotiate future agreements on behalf of all territories for whose external relations it is responsible – including Gibraltar.
A UK Government spokesman said: “For the withdrawal negotiations, given there are some circumstances which are specific to Gibraltar, we held talks with Spain which directly involved the government of Gibraltar.
“These were constructive and we look forward to taking the same approach to the future relationship.”
Mr Sanchez said “this is going to allow us to have direct negotiations with the UK regarding Gibraltar”.
Mr Tusk said: “I will recommend that we approve on Sunday the outcome of the Brexit negotiations.
“No-one has reasons to be happy. But at least at this critical time, the EU27 has passed the test of unity and solidarity.”
After his conversation with Mr Sanchez, Mr Juncker said: “Solidarity, determination and dialogue are the European way of finding solutions.”
But Mrs May also faced domestic difficulties as the Democratic Unionist Party held its conference in Belfast – with Boris Johnson making a guest appearance.
Mr Hammond sought to reassure the DUP over its “understandable concerns” about the Northern Ireland backstop provisions aimed at preventing a hard border with Ireland.
Mr Hammond told BBC Radio 4’s Today programme he believes the deal on offer is better for the UK than remaining in the EU, stressing it will help heal the divisions caused by Brexit.
“It’s a way of leaving the European Union with minimum negative impact on our economy,” he said.
“Economics is not the only consideration – we also have to look at the political healing process, bringing our country back together because countries that are disunited and divided are not successful countries.
“If we want this country to be successful in the future, we have got to bring it back together after this process.”
He warned a no-deal Brexit would unleash “economic chaos”, adding: “If the meaningful vote is lost we are in uncharted territory.
“We will be faced with potential economic chaos. I am sure we would get a very negative reaction from the business community, from investors, from the markets.”
He added “we might end up with no deal, we might end up with no Brexit” if the Withdrawal Agreement is blocked by Parliament.
If the deal does pass the Commons, the repercussions could bring down Mrs May’s Government, with the DUP hinting at withdrawing the support of its MPs.
The DUP’s 10 MPs have proved reluctant to vote with the Government since the terms of the Brexit deal became known and the termination of their Westminster arrangement would be a major blow to the Prime Minister.
DUP leader Arlene Foster told the Times Mrs May’s deal would be a worse outcome than a Labour government led by Jeremy Corbyn.
“It is, and the reason I say that is on day one of us leaving the European Union there would be no difference, we would be exactly the same as the rest of the UK, but in year five or 10 we would be different,” she said.
“If people are looking to Dublin for representation in Europe because we’re the subject of EU rules, that is so dangerous in terms of the union.”
DUP Westminster leader Nigel Dodds used his speech to the party conference to urge Mrs May to ditch her Brexit plan.
“The message from this conference, from every section of this party is – bin the backstop,” he said.
Mr Johnson, viewed as a potential leadership rival to Mrs May, was given a rousing reception at the conference.
He said the UK was on the verge of “making a historic mistake”, adding: “Unless we junk this backstop, we will find that Brussels has got us exactly where they want us – a satellite state.”
He set out a series of demands, including a commitment in the Withdrawal Agreement for a “super Canada” trade deal, a provision to withhold “at least half” the £39 billion divorce bill until trade talks are concluded and a dedicated Cabinet minister for no-deal planning.
Meanwhile, the Daily Telegraph reported that the next stage of Mrs May’s Brexit sales pitch will be on the immigration concerns believed to have been a key factor in the Leave vote.
According to leaked Cabinet papers, the Home Office has drawn up plans to issue low-skilled migrants with 11-month visas “with restricted entitlements and rights” while they are living in the UK.
Alternative plans could allow EU migrants aged between 18 and 30 to live and work in the UK for two years, with a strict cap on numbers.
The Government will abolish the cap on highly skilled “tier 2” migrants entirely, the report said, with the plans set out in the week beginning December 3 – a week before the crunch Brexit vote is expected in the Commons.