U.K. to Consider Full Transition Phase for Softer Brexit

  • May’s team prepares for three-year bridging period: official
  • The Times: Hammond said to have won cabinet backing for plan

Clarke Says U.K. Government Hopelessly Divided on Brexit

Theresa May’s U.K. government is drawing up plans to extend the timetable for negotiating and completing the Brexit process, which could see a long transition period lasting until 2022, according to an official familiar with the matter.

While she failed to win the bigger majority she’d hoped for, the prime minister’s decision to call a snap vote last month bought her more time at the end of the exit negotiations in 2019 by pushing back the next scheduled election from 2020 to 2022.

Key ministers including Chancellor of the Exchequer Philip Hammond and Brexit Secretary David Davis have persuaded her to use this breathing space before the heat of a new domestic political campaign begins to ensure the U.K. has a soft landing as it departs from the EU, the person said, speaking anonymously because the plans aren’t public.

The transition planning will be welcomed by businesses who want May to smooth the U.K.’s path out of the EU single market and customs union to avoid a “cliff edge” change in their trading conditions on Brexit day. Business leaders asked May to prioritize transitional arrangements in negotiations with the EU at a summit in her offices on Thursday.

Two newspapers reported on Friday that transition planning would allow continued free movement of people into the U.K. during the bridging period after Brexit happens in March 2019.

Four Years?

The U.K. cabinet will accept the free movement of European Union citizens for up to four years after Brexit as part of a transitional deal, the Guardian reported, citing an unidentified senior member of the cabinet. The Times of London also said EU migration would continue -- for up to two years, under plans devised by Hammond.

The U.K. cabinet will accept the free movement of European Union citizens for up to four years after Brexit.
Photographer: Oli Scarff/Getty Images

According to the official who spoke to Bloomberg, May’s own close advisers now see a fuller, more wide-ranging transitional phase, rather than a piecemeal series of individual implementation measures for individual sectors as being the most likely outcome of negotiations.

What is less clear is how long such a transition phase will last, and the form it will take. Questions remain over whether the U.K. will still be in the single market and customs union during this phase, which would mean accepting European immigration and the rule of the European Court of Justice -- breaching two of May’s Brexit red lines.

But even the Cabinet’s most hard-line Brexit supporters are dropping their opposition to a post-Brexit transitional period, with Liam Fox, the euroskeptic trade secretary, now publicly open to the idea.

While Fox can’t legally finalize any trade deals with countries outside the bloc until after Brexit, he’s ready to wait longer if a bridging period from EU membership to the U.K.’s new trading status will help businesses.

The details of the new post-Brexit free-trade agreement Britain wants with the EU may have to wait to be thrashed out until the transition period after Britain has formally quit the bloc.

“We continue to think that there is a high likelihood that Brexit is ultimately delayed beyond the March 2019 date by at least six to nine months,” said Malcolm Barr, JPMorgan Chase economist. “Even when Brexit does occur, the U.K. will likely move into a time-limited transitional arrangement which retains much of the status quo.”

— With assistance by Alex Morales

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