Brexit could risk "blowing up the economy" if no trade deal with the EU is reached, or "blowing up the Conservative party" if negotiations move too far towards maintaining the status quo, Peter Mandelson has warned.
The former European commissioner for trade, who also served in both Tony Blair and Gordon Brown's Labour cabinets, said that the Conservative party was "divided" between those wanting to maintain current trading relationships with the EU and those pushing for change, and that this could hold up talks.
Speaking at a London summit today organised by US think tank the Milken Institute, Mandelson's words came as an 11th-hour phone call yesterday between Theresa May and Ireland's Democratic Unionist Party (DUP) leader Arlene Foster scuppered hopes for a Brexit deal to be agreed.
"The hitch yesterday meant talks came apart because hard Brexiters in the Conservative party joined forces with the DUP to scupper what Mrs May was doing," said Mandelson. "This division is going to run through the second phase of talks."
Mandelson, who is now president of think tank Policy Network and chairman of advisory group Global Counsel, added that he had been "talking to people in Brussels, Berlin and Paris" who wanted to move on from the first phase of Brexit talks.
"The EU 27 want to move from phase one to phase two of negotiations," he said, adding that this would likely happen at the European Council meeting on the 14 and 15 December "assuming that the DUP will have had their concerns assuaged". Although this would represent progress, May might then face new problems.
"The Prime Minister has yet to put to the cabinet what the goals are going to be," said Mandelson, to a room packed with City professionals. "Her priority has been to move the cabinet on the three issues in phase one: the cost of leaving the European Union, which is sort of settled at £50bn, the rights of EU citizens living in Britain, and the border in Ireland."
Speaking alongside Mandelson, Tina Fordham – Citi managing director and chief global political analyst – said May was "one crisis away" from being forced out of her position as Prime Minister.