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In ‘Brexit’ Speech, Theresa May Outlines a Clean Break for U.K. In ‘Brexit’ Speech, Theresa May Outlines a Clean Break for U.K.
(about 5 hours later)
LONDON — In a speech that could define Britain’s relations with its neighbors for decades to come, Prime Minister Theresa May on Tuesday charted a course toward a clean break with the European Union, calling for the country to abandon the single market after more than four decades of integration with the Continent. LONDON — “Get on with it.”
Mrs. May emphasized Britain’s determination to regain control of migration from the European Union and rejected the supremacy of the European Court of Justice, even at the risk of losing unfettered access to the single market, but she also said she wanted to procure tariff-free trade with the bloc and to keep parts of its customs union. With those words early in a major speech on Tuesday, Prime Minister Theresa May began Britain’s course toward a clean break with the European Union and expressed her fondest hope: that the time for “division and discord” is over.
The long-awaited speech was a shift for Mrs. May, who had dropped heavy hints about her thinking but had refused to outline publicly how Britain would leave the bloc after voters supported a withdrawal in a June referendum. Her much anticipated speech initiated what promised to be a hugely complex, drawn-out negotiation, and it defined the broad objectives, but not the details, of British withdrawal. “The United Kingdom is leaving the European Union, and my job is to get the right deal for Britain as we do,” she said.
After months of stressing that there was no “binary divide” over Britain’s membership of the single market, she explicitly ruled out staying a member, arguing that it was impossible for a Britain that controlled its borders and set all of its laws. Mrs. May charted a course toward the break after more than four decades of tight integration and tried to define Britain’s relations with its neighbors for decades to come.
“Let me be clear,” she said, adding that any agreement would be sent to both houses of Parliament for approval, “What I am proposing cannot mean remaining in the single market.” She confirmed that Britain is determined to regain control of migration from the European Union and rejected the supremacy of the European Court of Justice. That stance is anathema to the European Union, which has made the free movement of people — as well as goods, capital and services — one of its bedrock principles and which relies on the court to arbitrate.
The speech appealed for a new relationship with Continental Europe, with Mrs. May saying she wanted “a new and equal partnership — between an independent, self-governing, global Britain and our friends and allies in the E.U.” “Let me be clear,” Mrs. May said, acknowledging the differences. “What I am proposing cannot mean remaining in the single market.”
“Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out,” she added. “We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave.” She said she hoped to complete a final deal with the European Union by March 2019 and that it would be voted on by both houses of Parliament. She was not clear about what would happen if Parliament rejected the deal, though some speculated that a rejection would result in the sort of chaotic, “cliff edge” breakup that she and Britain’s bankers and businessmen hoped to avoid.
Nevertheless, she warned that if Britain were locked out of European markets, it would feel free to cut corporate taxes and change its economic model to remain competitive. Mrs. May struck a diplomatic note, including an appeal for a new partnership with Continental Europe, but not at all costs.
Mrs. May’s intervention represents an opening gambit in a hugely complex negotiation. “The United Kingdom is leaving the European Union,” she said. “My job is to get the right deal for Britain as we do.” “We seek a new and equal partnership — between an independent, self-governing, global Britain and our friends and allies in the E.U.,” Mrs. May said. “Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half in, half out.”
Reaction from opponents of a British departure from the bloc — commonly known as Brexit — was swift and harsh. “Theresa May has confirmed Britain is heading for a hard Brexit,” said Tim Farron, the leader of the centrist Liberal Democrats. “She claimed people voted to leave the single market. They didn’t. She has made the choice to do massive damage to the British economy.” And she appealed to Britons, especially to those in Scotland, Wales and Northern Ireland, to unite behind the government and stop refighting the referendum that backed Brexit, which she had opposed.
Jeremy Corbyn, the leader of the Labour Party, focused on the Conservative Party promise to cut corporate taxes to attract businesses, on the Irish model, which the chancellor of the Exchequer, Philip Hammond, proposed on Sunday. The reaction among her opponents in the Remain camp was predictably harsh and seemed to herald a long and bruising process.
“Theresa May has made clear that she is determined to use Brexit to turn Britain into a bargain-basement tax haven on the shores of Europe,” Mr. Corbyn said. “She makes out this is a negotiating threat to the 27 E.U. countries, but it’s actually a threat to the British people’s jobs, services and living standards.” “Theresa May has confirmed Britain is heading for a hard Brexit,” said Tim Farron, the leader of the centrist Liberal Democrats. “She claimed people voted to leave the single market. They didn’t. She has made the choice to do massive damage to the British economy.”
The response from European leaders was more muted. Frank-Walter Steinmeier, the German foreign minister, welcomed the fact that Mrs. May “finally has given a little more clarity over the British plans,” and he called on the 27 other member countries to unite to preserve the single market. The Labour leader Jeremy Corbyn accused the Tories of turning Britain into “a bargain-basement tax haven,” with their recent threat to slash corporate taxes if a good deal cannot be reached with the European Union.
Even before the speech, Mr. Farron had accused Mrs. May of taking Britain toward “a destructive, hard Brexit,” with consequences that “will be felt by millions of people through higher prices, greater instability and rising fuel costs.” The speech, which provided some degree of substance, gained a warmer reception in the markets, with the pound seeming to stabilize after several jittery days. It rose as much as 1 percent against the dollar during her speech, while stocks on the London exchange fell.
His party pointed on Tuesday to the impact of the slump in the value of the pound, which helped push up inflation in December to 1.6 percent, its highest rate since July 2014. Supporters of a withdrawal have been encouraged as well by reports that other countries in the bloc have recognized that they might suffer if there were a complete rupture and they were denied access to London’s large financial services sector. But British businesses remained nervous.
While currency markets had been jittery in recent days in anticipation of the speech, the pound rallied by as much as 1.5 percent after Mrs. May began talking, suggesting her remarks — leaked to British news outlets over the weekend — had already been accounted for. Carolyn Fairbairn, director general of the Confederation of British Industry, a business lobbying group, welcomed the greater clarity provided by Mrs. May, but worried that “Ruling out membership of the single market has reduced options for maintaining a barrier-free trading relationship between the U.K. and the E.U.”
Kallum Pickering, senior Britain economist at Berenberg Bank in London, was more blunt, writing in an analysis that “as we do not expect the E.U. to compromise its principles, the U.K. is set to face significant economic consequences from Brexit.”
Few analysts expect the negotiations to go as smoothly or as quickly as Mrs. May seemed to say in her speech. In recognition of the troubles that may lie ahead, Mark Boleat, the policy chairman for the City of London Corporation, the heart of Britain’s financial services industry, urged Mrs. May to swiftly secure a transition deal that would provide the certainty that businesses crave through the years it would take to fashion a free-trade agreement.
Charles Brasted, a partner at Hogan Lovells, an international law firm, cautioned that the deal Mrs. May wanted was likely to be seen by the European Union as “precisely the cherry picking that they have warned against.” He added: “The objectives are now clear – the path towards them is uncharted.”
But he warned that “every one of the aspirations expressed by the U.K. government today will demand exceptional political skill to negotiate and will be complex to implement legally and commercially.”
In Europe, Donald Tusk, the president of the European Council, said in a Twitter message: “Sad process, surrealistic times but at least more realistic announcement on #Brexit. EU27 united and ready to negotiate after Art. 50.” Germany’s foreign minister, Frank-Walter Steinmeier, welcomed Mrs. May’s “desire for a positive and constructive partnership, a friendship with a strong E.U.,” which Germany would reciprocate.
Mrs. May’s speech, delivered in the grand surroundings of Lancaster House in London, was the most closely watched statement on European policy since January 2013, when the prime minister at the time, David Cameron, promised to hold a referendum on European Union membership.Mrs. May’s speech, delivered in the grand surroundings of Lancaster House in London, was the most closely watched statement on European policy since January 2013, when the prime minister at the time, David Cameron, promised to hold a referendum on European Union membership.
Mrs. May, who came to power after the referendum, has promised to begin the two-year negotiation process on British withdrawal by the end of March, putting the country on course to leave the European Union in 2019. The prospect that Britain would remain part of the single market has been fading since Mrs. May said in October that she would demand complete control of migration from the European Union and release from the European Court of Justice.
The prospect that Britain would remain part of the single market had been fading since October, when Mrs. May told the Conservative Party conference that she would insist on complete control of migration from European Union countries and on release from the rulings of the European Court of Justice. The extent to which Mrs. May would be willing to compromise to maintain some access to the single market and to the customs union for goods was less clear. Membership in the customs union limits the ability of member countries to strike individual free-trade deals with non-European nations. So she said she wanted a deal that would allow Britain to trade freely with the world, but still have as much tariff-free trade as possible with European Union countries
That stance is generally regarded as incompatible with membership of the European Union’s single market, which has made the free movement of people — as well as goods, capital and services — one of its bedrock principles, and which relies on the court to arbitrate. Ideally, Britain would like to have its cake and eat it, in the memorable phrase of the foreign secretary, Boris Johnson. In other words, Britain would reject what it disliked about the bloc, such as freedom of movement, but keep trade unencumbered as it tried to get the best possible trading deal consistent with its other objectives.
But despite her pledge that she did not want to be “half-in, half-out” of the European Union, that seemed to be exactly the model Mrs. May favored regarding its customs union, which eliminates tariffs between European Union countries and some other neighbors that participate. While European nations are expected to be stingy with market access, Mr. Pickering says he believes they will eventually bend.
However, membership of the customs union limits the ability of member countries to strike individual free-trade deals with non-European nations, another of Mrs. May’s major objectives. In the final deal, he wrote, he still expects Britain and the European Union to agree to a deal in which “the U.K. maintains a good level of access to the E.U.’s goods markets and limited access to the less-developed services markets.”
On Tuesday, she said she hoped to strike deals around the globe and to keep tariff-free access to European markets, though it seemed unlikely that European leaders would go along with such a plan. “Crucially, we expect the U.K. to lose its E.U. financial services passport,” Mr. Pickering wrote, referring to a system that allowed banks based in Britain to offer financial services throughout the European Union. “This follows from the U.K. raising some modest barriers to migration from the E.U.”
Supporters of Britain’s departure from the European Union have argued that leaving will provide new trading opportunities. Mrs. May echoed that idea in her speech, calling for a “country that gets out into the world to build relationships with old friends and new allies alike.” Many European Union countries have backed taking a hard line against Britain to send a message to other member states that might consider leaving. Anticipating that, Mrs. May said that Britain wanted a successful European Union and a friendly partnership, but that “no deal for Britain is better than a bad deal for Britain.”
Her ability to accomplish her objectives will still depend on the willingness of the 27 other European Union nations, as well as the European Parliament, which would have to agree to any new trade deal.
Another crucial issue is whether Britain will be able to negotiate a transitional agreement to avoid a sudden change in the rules for business — the so-called cliff edge — in 2019, with the possible introduction of tariffs under rules laid down by the World Trade Organization. Mrs. May said she would seek to avoid this by phasing in the new rules but added that she wanted to avoid “permanent political purgatory.”