Theresa May calls for two-year transition deal after Brexit

The PM during her speech in Florence (Getty)

 

Theresa May has set out plans for a two-year implementation period to smooth the Brexit process and promised to honour the UK’s commitments to the EU’s budget as she sought to end the deadlock over Britain’s break from Brussels.

The Prime Minister said neither the Government nor the EU would be ready to fully implement new arrangements for Brexit on March 29 2019 when the UK formally leaves.

She proposed an implementation period during which “the existing structure of EU rules and regulations” would apply.

That means Britain would remain a  member of the single market – and the UK would continue to abide by existing immigration rules.

“As of today, these considerations point to an implementation period of around two years,” she said, although in some areas changes to new arrangements could be made more quickly.

Michel Barnier, the EU’s chief Brexit negotiator, said the speech was a “step forward” but cautioned it should ie turned into a “precise negotiating position”.

He said: “The EU shares the goal of establishing an ambitious partnership for the future.

“The fact that the government of the United Kingdom recognises that leaving the European Union means that it cannot keep all the benefits of membership with fewer obligations than the other member states is welcome.”

“The EU will continue to insist on sufficient progress in the key areas of the orderly withdrawal of the UK before opening discussions on the future relationship.”

The PM’s vision

The Prime Minister also used the landmark 35-minute speech in Florence to call for a “bold new strategic agreement” in a treaty on security as a sign of the UK’s continued commitment to the continent.

Theresa May delivers her speech in Florence (PA Images)

In a landmark speech, the PM said that inflated reports about the size of any so-called Brexit divorce bill had not been helpful, but that she would honour any commitments already made.

Crucially though, she did not place an amount on what that amount would be, with recent reports placing it at around €20bn.

Explaining the UK’s decision to vote in favour of Brexit, Mrs May said that Britain had always felt on the outskirts of the EU and it “never felt to us an integral part of our national story”.

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She went on to say the British people had chosen to strengthen the role’s of the national parliaments in the UK rather than be governed by those in Brussels.

But her tone was much softer than in previous speeches and she was at pains to say that Britain was not turning it’s back on its friends in Europe.

David Davis, Philip Hammond and Boris Johnson attend the speech by Theresa May (AP)

She added that “the eyes of the world is upon us” and insisted that Brexit could be a success, maintaining that although negotiations had been “difficult”, concrete progress had been made in talks between Michel Barnier and David Davis.

Let’s get ‘creative’

Three times during the speech, the Prime Minister referred to the need for both sides to find a “creative” solution to Brexit that worked for both sides.

She confirmed the UK will no longer be part of the single market and customs union in the future and rejected both the Norway and Canadian trade models.

She said such relationships with the EU were unsatisfactory for the UK, partly because it would be too much of a restriction on our markets. “We can do so much better than this,” she stated.

Crucially, she stated that the EU is our largest trading partner, which meant there is “no need to impose tariffs”.

“It’s in all of our interests for our negotiations to succeed,” she said. “The eyes of the world are on us, but if we can be imaginative and creative about the way we establish this relationship… I believe we can be optimistic about the future we build for the EU and the UK.”

She made commitments to those in Ireland and EU citizens living in the UK that they will be looked after, saying that she wanted to put the rights of EU citizens into UK law.

She went on: “We want to work hand in hand with the European Union.. in a deep and special partnership.”

Reaction

Boris Johnson has praised the Prime Minister’s Brexit speech as “positive, optimistic and dynamic”.

The Foreign Secretary said the Florence speech “rightly disposes of the Norway option”.

He added: “A strong Britain working hand in hand with a strong Europe – but once again free to take our own decisions.”

But former Ukip leader Nigel Farage criticised Mrs May’s vision, claiming Britain will leave the EU in “name only”.

He tweeted: “Theresa May’s Brexit vision is that we Leave the EU in name only. All areas of integration we have currently will be rebadged.”

Labour’s Jenny Chapman, a shadow Brexit minister, told the BBC: “We are 18 months in, the speech she gave today had one hell of a build-up and it was very, very weak, disappointing, empty and … clearly leaves so many questions unanswered, and I think many people will be scratching their heads and wondering what on earth the fuss has been about with this speech.

“Beyond committing to transition, which frankly everybody knew was an inevitability, there really wasn’t very much to it.”

What about the pound?

The pound fell to a daily low against both the US dollar and euro as investors reacted to the Prime Minister’s speech.

Sterling was down 0.6% versus the US dollar at 1.350, having only been 0.2% lower at the start of the Prime Minister’s address.

Versus the euro, the pound extended its losses to trade 0.8% lower at 1.127.

It takes the UK currency further away from the near 15-month highs it reached just last week amid signs the Bank of England is likely to raise interest rates later this autumn.

Hamish Muress, a currency analyst at international payments firm OFX, said that while Mrs May tried to outline an “optimistic and upbeat relationship” with the EU, her speech did little to satisfy investors.