Theresa May Plans Instant Split From Some EU Rules After Brexit

Updated on
  • Bank regulation, farm subsidies and trade deals in U.K. sights
  • May’s Brexit ‘war cabinet’ breaks up without agreement again

Theresa May

Photographer: Luke MacGregor/Bloomberg

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Prime Minister Theresa May is drawing up plans for an instant break from key European Union regulations after Brexit -- including some on financial services -- in a drive to exploit the upside of the divorce, according to senior U.K. officials.

As part of the government’s emerging thinking for the “end state” relationship between Britain and the EU, the officials believe the country should immediately forsake EU rules in certain areas, while staying close in others for longer.

Two people familiar with the U.K. position said the first of these changes would take effect once the two-year transition period expires in 2021. The priorities are likely to include ripping up regulations that financial services want to escape. The blueprint will also involve quitting the EU’s customs regime to allow the U.K. to strike new free-trade agreements, and replacing the EU’s Common Agricultural Policy.

It will then be up to future governments to decide whether to move further away from the EU, once Brexit gives the U.K. the power to act independently, they said.

Read more: Barclays CEO Is Said to Urge May to Mull Break With EU Rules

The U.K.’s plan for its future partnership with the EU has yet to be agreed by May’s senior ministers. A committee of cabinet ministers met for two-and-a-half hours Wednesday and again for two hours on Thursday to discuss the question but both meetings broke up without reaching a final agreement.

Speaking to reporters on Thursday, Brexit Secretary David Davis said the meeting was “very constructive” with “a lot of things resolved,” although the final plan is not finished. “There’s still progress to be made, there are still things incomplete,” he said.

Brexit Upside

May’s team is launching a drive inside government departments to identify and promote the opportunities that Brexit will bring for reforming the economy, such as overhauling the EU’s agricultural subsidies and negotiating trade agreements with third countries.

Michael Gove

Photographer: Chris J. Ratcliffe/Bloomberg

One senior member of May’s administration said the plan is to counter the idea that Brexit has put the government in a permanent “defensive crouch” by emphasizing the upside to the split more vigorously in the months ahead. Talking up the benefits of Brexit will reduce the overall economic costs resulting from the U.K.’s withdrawal, the person said.

Read more: Rise of an English Gentleman Threatens the Hardest of Brexits

Brexit-supporting ministers including Foreign Secretary Boris Johnson, Environment Secretary Michael Gove, and Trade Secretary Liam Fox are likely to welcome the outline plan to break away from EU rules as soon as possible. May is under pressure from euroskeptics within in her Conservative party, some of whom are said to be plotting to oust her.

At the weekend, May’s office was forced to promise that the U.K. would not be in any form of customs union with the EU in the face of demands from her Tory colleagues. Staying in the customs union’s common external tariff would stop Britain being able to strike its own trade agreements with countries such as the U.S., which is seen as a key benefit of Brexit.

Boris Johnson

Photographer: Chris J. Ratcliffe/Bloomberg

May’s assurances failed to convince all her colleagues. One senior official with knowledge of the euroskeptics’ position said there is still a live debate among May’s ministers over the issue of the customs regime, and raised fears that the need to avoid a hard border with Ireland could open the door to staying in parts of the customs union.

Another senior official confirmed that the Irish border question was far from settled, with no clear solution that would allow the U.K. to leave the EU customs union yet available.

Read more: Why Ireland’s Border Is Brexit’s Vexing Puzzle: QuickTake Q&A

(Adds Davis comments in sixth paragraph.)
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