May to Reboot Brexit Plan by Requesting Transition Period

  • Prime minister to seek time-limited implementation period
  • May will outline new Brexit strategy in Florence speech

May to Deliver Landmark Brexit Speech in Florence

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U.K. Prime Minister Theresa May will reboot her Brexit strategy on Friday by proposing a period of transition after the split with the European Union even if that means continuing to send money to Brussels and observing its rules until 2021.

In a much-anticipated speech in Florence, scheduled for 3.15 p.m. local time, May will suggest a time-limited implementation phase that officials have indicated will last two years and will be staggered, depending on the sector.

The goal is to maintain trade ties to the U.K.’s biggest market and give businesses time to adjust to the new regime. A holdover period would protect companies from being hit with unwieldy tariffs and regulations overnight, if no long-term trade deal has been struck by Brexit day in March 2019.

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“We share a profound sense of responsibility to make this change work smoothly and sensibly,” May will tell the EU, according to extracts of her speech released in advance by her office. “While the U.K.’s departure from the EU is inevitably a difficult process, it is in all of our interests to make the negotiations succeed.”

May will pitch her vision for Brexit to the EU in Florence on Friday. Simon Kennedy previews her remarks.

(Source: Bloomberg)

The transition request marks a victory for Chancellor of the Exchequer Philip Hammond who seized the opportunity of June’s disastrous U.K. election result to push for a pro-business Brexit. At the same time, two years would be less than the three sought by firms, a compromise reflecting May’s need to keep onside euroskeptics such as Foreign Secretary Boris Johnson who favor a quicker break.

‘Sufficient Progress’

The prime minister is trying revive gridlocked talks with the EU and her own authority diminished after the loss of her parliamentary majority in June’s election. As the clock ticks down to Britain’s departure, May and her negotiating team need a breakthrough to persuade the EU to start discussing the long-term trade deal she wants with the other 27 member states after Brexit.

First, though, the two sides must make what the EU will judge to be “sufficient progress” on the terms of the divorce -- and this is where the talks are stuck.
 
Read more about how May’s Brexit stance has evolved since January

Chief among the EU’s demands is that May finally engages on the issue of money. While she is planning to use the Florence stage to pledge to pay around 10 billion euros ($11.9 billion) for each year of transition, the EU wants her to address the so-called Brexit bill, which some estimates put at a gross 100 billion euros.

Michel Barnier

Photographer: Dario Pignatelli/Bloomberg

Michel Barnier, the EU’s chief negotiator, on Thursday gave a blunt warning of what he wanted to hear from May, saying Britain must "settle the accounts" and also accept the EU’s rules during any transition.

That demand to abide by the decisions of EU courts and make full budget contributions during any interim phase is why many who campaigned for Brexit now want a quicker divorce than the long transition sought by business. 

Multiple Audiences

To trigger talks on a future trade accord, the U.K. must also satisfy the EU on the rights of European citizens living there and resolve the Irish border, Barnier told Italian lawmakers in Rome. “If we want a deal, time is of the essence,” he said. “To make progress, we are waiting for clear commitments from the U.K.”

To do so, May will pledge to strengthen legal protections for the 3 million EU citizens living in the U.K., the Financial Times reported. She will propose that those rights be written into Britain’s final exit treaty, binding the courts to the agreement and meaning its terms can’t be diluted by lawmakers when transposed into U.K. law.

May’s speech will need to convince multiple audiences, at home and abroad.

On the continent, she will try to curry favor with leaders from the EU’s other members, knowing it is they rather than Barnier who will rule whether Britain has done enough for trade talks to start.

‘This Chapter’

With that in mind, she will make clear she wants Britain and Europe to be friends and to work together for the benefit of both sides. The U.K. and the EU should be "imaginative and creative about the way we establish this new relationship,” she will say.

British and European diplomats believe the tone of May’s remarks will be critical to showing EU politicians that she will act in good faith during the negotiations, which stumbled last month in a row over money.

May will tell the audience in Florence that the talks must make progress, for the sake of both sides. “If we can do that, then when this chapter of our European history is written, it will be remembered not for the differences we faced, but for the vision we showed,” she will say.  

On the domestic front, May faces competing demands. She must appease original Brexit supporters such as Johnson, who last week upended her planning by publishing his own 4,200-word Brexit manifesto, which warned against paying to access the EU’s markets.

Boris Johnson

Photographer: Chris Ratcliffe/Bloomberg

May subsequently talked him round, and her cabinet on Thursday appeared to sign up to her approach. Even so, next month’s conference of her Conservative Party leaves her vulnerable to potential leadership rivals plotting to replace her.

Her senior Cabinet team will put on a show of unity in Florence, with May joined by Johnson, Hammond and Brexit Secretary David Davis, as she delivers her speech.

Perhaps drawing inspiration from Johnson who last week spoke of a "glorious" outlook for the U.K. after the split, May will declare in Florence that "Britain’s future is bright,” a line likely to play well with hard-line euroskeptics in her Tory party.

Delicate Balance

The speech comes eight months since May set out her vision of what has been called a “hard Brexit,” taking Britain out of the EU single market and customs union, in a speech at London’s Lancaster House.

June’s election debacle forced her to soften her ambitions, with Hammond advocating a firmer “transition” period that maintains links to the single market and customs union, rather than the phased “implementation” of changes that May originally set out.

The ultimate success of her Florence speech will in the end be out of her hands. While many EU governments will welcome the premier’s intervention, they will also want her to do more than just concede Britain has financial obligations to cover.

Although they don’t require her to give a number for the Brexit bill she’s willing to pay, they do want her to help build a framework for calculating the final sum and to account for Britain’s liabilities and commitments.

The EU is wary also of negotiating through set-piece speeches. Officials say that any offer May makes Friday would have to translate into concrete positions that would enable negotiators to haggle over every detail when they reconvene next week.

Still, a signal from May that the U.K. will go some way to meeting the EU’s financial demands, could persuade those EU countries eager to open trade talks with the U.K. to put pressure on the bloc’s negotiators to step up the pace.

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