By Guy Faulconbridge and Andy Bruce
LONDON (Reuters) - Prime Minister Theresa May told rebels in her divided party that if they torpedoed her Brexit deal then the United Kingdom would leave the EU without any agreement, a scenario the IMF said would make the country much poorer.
The United Kingdom is due to leave the EU on March 29 and yet little is clear. So far, no full exit agreement has been reached and some rebels in May's Conservative Party have threatened to vote down a deal if she clinches one.
The fate of May's government and her Brexit plan is in doubt because it is unclear whether she can command the 320 votes she needs in the House of Commons, the lower house of the British parliament, to approve a deal.
"I think that the alternative to that will be not having a deal," May told BBC TV, adding she was confident of getting a good agreement she thought parliament would ultimately approve.
Recent signals from Brussels have buoyed hopes that the United Kingdom and the EU can agree and approve a proper divorce arrangement before it leaves, though the sides are still divided on about one fifth of the detail of a deal.
But many business chiefs and investors fear politics could scupper an agreement, thrusting both the EU and the United Kingdom into a "no-deal" Brexit that they say would weaken the West, panic financial markets and block the arteries of trade.
London mayor Sadiq Khan said on Sunday that as Britain now faces a choice between a bad Brexit deal or a damaging "no-deal" Brexit, voters should be given another referendum.
DISORDERLY BREXIT?
With May's plans in doubt, many British ministers have outlined the damage that they say a disorderly "no-deal" Brexit would do to the world's fifth-largest economy and its reputation as a politically stable haven for investment.
International Monetary Fund Managing Director Christine Lagarde said failure to get a deal would make the economy shrink. The economy will grow around 1.5 percent this year.
"I very much hope and pray that there will be a deal between the European Union and the UK," she told reporters.
Michel Barnier, the EU's chief negotiator on the issue, said in Madrid on Monday that talks between the EU and Britain on Brexit are being conducted in a spirit of "good cooperation",
But the EU, in a note before Barnier briefs ministers from member states on Tuesday, said both sides still have work to do to settle a range of issues, including the Irish border.
"Some parts of the draft withdrawal agreement have already been agreed in principle by the UK and the EU negotiators, although nothing is agreed until everything is agreed," the note, seen by Reuters, said.
"There are still parts of the withdrawal agreement that require further negotiation. One of them is the issue of how to avoid a hard border between Ireland and Northern Ireland."
Supporters of Brexit, who admit there may be some short term instability, say some British ministers and business chiefs are spreading scare stories about the impact of a "no-deal" Brexit in an attempt to rally support behind May's plans.
The rival tipped by bookmakers to succeed May, Boris Johnson, attacked May's Brexit plans, known as Chequers after the country house where they were hashed out in July.
"The whole thing is a constitutional abomination, and if Chequers were adopted it would mean that for the first time since 1066 our leaders were deliberately acquiescing in foreign rule," Johnson said, referring to the 11th Century invasion which established Norman rule over England.
IRELAND
Johnson, May's former foreign minister, scolded May for her handling of negotiations on the future of the border between Northern Ireland and the Irish Republic.
But he told reporters on Monday that a technical fix to the Irish border issue reported by The Times newspaper could allow for a proper Brexit deal to be clinched.
EU officials and diplomats insist that nothing has fundamentally changed on the so called backstop plan for the Irish border.
What has changed is a shift away from discussion of checks on goods passing through Northern Ireland's border with Ireland to a discussion of the mechanisms for checking goods traveling between Northern Ireland and the rest of the United Kingdom.
"This is part of the de-dramatizing process, Barnier is being creative in offering concessions in the text that seem to go the British way but in fact don’t change the reality," one EU diplomat said.
No new border plan will materialize before the Conservative Party conference on Sept. 30-Oct 3, the diplomat said.