Richmond shows UK's Europe split as wide and deep as ever

The Lib Dems' Sarah Olney celebrates her by-election victory. Credit: PA

The Richmond Park by-election shows that, far from healing British divisions over our relationship with the EU, that referendum has deepened them.

The point is that the rejection of the Brexiteer Tory Zac Goldsmith, who was wearing the clothes of an independent because of his opposition to Heathrow expansion, was a protest vote certainly against what's known as "hard" Brexit and probably against Brexit itself.

Because the Lib Dems and their candidate Sarah Olney campaigned for the UK to remain intimately bound into the EU's single market - a new settlement that Brexit purists would see as toxic and a betray of the referendum result.

And the Lib Dems also want a second in-or-out vote once the prime minister has agreed the final Brexit deal with the 27 other EU members.

So the result is a mini earthquake.

Zac Goldsmith pictured as he listened to his rival's victory speech. Credit: PA

But it should not really be a surprise: the voters of Richmond Park are largely of the Remain persuasion, and as I mentioned five weeks ago this by-election was always going to be about Brexit and was never going to fulfil Goldsmith's ambition of shining any kind of light on Heathrow, because the Lib Dems too are opposed to the third runway.

So how will the prime minister feel about it?

Well a little bit disappointed that the Tories already slim majority in the Commons has become just a bit slimmer.

But also relieved, since she fears that the hardest version of Brexit wanted by some of her parliamentary and cabinet colleagues - out of the single market, out of the customs union, full control of immigration from the rest of the EU, no payments to the EU budget, no duties owed to the European Court of Justice - would come with a steep economic price.

Hard Brexit would represent a clean but expensive break with the EU. And she probably feels this morning that her consistent refusal to firmly commit to that hard clean break looks more rational.

She, and her chancellor Philip Hammond, would prefer an arrangement with the EU's great trading area that replicates to some considerable extent our current membership of the single market: she's said it often enough to be taken seriously on this.

Will Theresa May opt for a softer or harder Brexit approach? Credit: PA

That will require her - against the wishes of many Tories and all of Ukip - to take a fairly flexible approach to immigration control, which she will find hard.

And it also requires flexibility on making financial contributions to the EU - which the secretary of state for leaving the EU David Davis did concede yesterday (and to be fair to him, he's always taken the view that payments to Brussels would be acceptable, so long as they could be seen as in some sense "voluntary").

For what it’s worth, one well-placed member of the cabinet told me gleefully that a Swiss style arrangement of payments to the EU's aid and cohesion programmes might even be offsettable against the government's pledge to spend 0.7% of GDP on overseas aid.

Britain's vote to leave the EU presents a number of challenges ahead. Credit: PA

Anyway, Richmond will reinforce the value of sterling, because investors will see it as reinforcing the likelihood that Brexit will be soft.

Investors are right about that, for once.

But I should also say that there is absolutely no sign in the pro-Brexit parts of the UK of any remorse about what they voted for.

Worse than that, if there is going to be buyers' remorse, in many parts of the UK it will be as and when there's a sense that leaving the EU is not as definitive as many expected and wanted.

So as I said, the referendum has in no way healed our European divisions and hatreds - and the worry heightened by the trouncing of Zac Goldsmith would be of them compounding resentment between north and south, young and old, haves and have-nots.