Theresa May has signalled there will be no transitional deal to prevent a “cliff-edge” Brexit unless the UK settles its final trading relationship with the EU next year, prompting warnings that businesses will start leaving the country before then.
The prime minister surprised MPs when she told them in a Commons debate that there could be no “implementation period” unless the UK had settled its “future partnership” with the EU, which is unlikely to happen until next summer at the earliest and may fail to be agreed at all.
Her remarks alarmed MPs fighting against a hard Brexit and some business groups who have already been intensively lobbying for the government to agree the terms of transition with the EU by Christmas – before companies make their financial plans for 2018.
Labour warned that the delay in agreeing a transitional period was “a recipe for job losses, businesses disinvesting and an economic downturn”, while backbench Tory MP Nicky Morgan called for more clarity for businesses.
The prime minister was responding to a question asked by Iain Duncan Smith, the former party leader and a leading Tory Eurosceptic, to confirm that there could not be agreement on an implementation period until there was a final deal that could be worked towards.
She replied: “I thank my right honourable friend because he is absolutely right. The point of the implementation period is to put in place the practical changes necessary to move to the future partnership and, in order to have that, you need to know what that future partnership is going to be.”
She was pressed to clarify her remarks by Yvette Cooper, the former shadow home secretary, who asked whether she meant there “won’t be any transition deal at all” if no long-term UK-EU trade deal was agreed by this time next year.
“An implementation period is about a period that is adjusting to the future relationship,” May said, implying that there could be no transition if there was nothing to implement. “That’s the basis on which I’ve put it forward to the European Union and that’s the basis on which we’ll be negotiating an agreement.”
May said the EU’s chief negotiator, Michel Barnier, had suggested that any trade deal with the EU would need to be agreed by October 2018 in order to be ratified by all the national and regional parliaments in time for the day of the UK’s exit in March 2019.
But Barnier appeared to contradict her comments, saying any final trade deal could take years to negotiate and, even then, Britain could expect little better than the one struck with Canada.