02 March 2018

Today’s Road to Brexit speech, the Prime Minister’s third major Europe speech, was her most successful so far. Although it’s hard to understand why much of the content could not have been delivered months – if not well over a year – ago, it is better late than never. Theresa May was more honest about the trade-offs inherent from Brexit, something for which Open Europe has long called. She said she wanted to “be straight with people” and that the reality is “we all need to face up to some hard facts”. Leaving the EU and Brexit will mean “life is going to be different” and in some ways our access to the EU’s markets, and their access to our markets, “will be less than it is now.”

The Prime Minister also began to challenge the EU’s own mantras and red lines, and to point to existing arrangements which provide useful precedents for the UK. In particular she referred to the different agreements which the EU has made with the Ukraine, with Switzerland, with South Korea, and with Canada, as well as the agreement it had hoped to reach with the United States (TTIP). Theresa May is right to note that Britain cannot “accept the rights of Canada with the obligations of Norway”. She emphasised that all free trade deals were bespoke, but repeated her argument from her Florence Speech that the UK and EU share the same fundamental beliefs, the same norms.

The Prime Minister suggested that on goods there would be limited divergence, with standards remaining substantially similar. The UK would offer a ‘reciprocal binding commitment’ to ensure fair and open competition, but only a ‘strong commitment’ to maintain regulatory standards as high as the EU’s. Theresa May noted that it would, however, be open to Parliament to move in a separate direction from the EU on goods regulation in the future, knowing that this could mean a loss of market access.

There was a specific acknowledgment of the problems of the Irish border as well as some limited new policy suggestions. The Prime Minister admitted the UK has a responsibility to help finding a solution, but noted that it could not do so alone. She also fleshed out the two customs options which her Government set out in the autumn of last year. The Chancellor’s ‘Customs Partnership’ – a unconvincingly complex system of tariff mirroring – now seems to be the preferred choice rather than an also ran, alongside a deep customs agreement. Open Europe examined both options in our Nothing to Declare report published last year.

On services, there was an appeal to limit new barriers to trade, but no broad commitment to avoid divergence. On Financial Services, Theresa May ruled out passporting which would require rule-taking and instead called for a new reciprocal framework where both sides broadly maintained the same regulatory outcomes. A speech from the Chancellor will set out further details shortly.

The Prime Minister also committed to seeking associate membership of regulatory bodies for medicines, aviation safety, and chemicals. She emphasised that the UK had important expertise to contribute in these areas, but also underscored that it would be open to Parliament to reconsider these agreements in future. An important concession was to note that associate membership would mean following the rules, and paying for the privilege.

There were warm words about “the valuable links” and contributions made by EU citizens in the UK. Theresa May re-emphasised that Free Movement would end, but hinted that things would not be too difficult for EU workers coming to the UK. She floated the idea of an “appropriate labour mobility framework” to enable businesses and self-employed professionals to travel easily to provide services.

Overall Open Europe’s view is that the Prime Minister’s macro approach to Brexit is correct. The Government is right to commit to leaving the Single Market and Customs union, and to seek a new comprehensive and bespoke partnership. Otherwise the UK would have all the costs but none of the potential benefits of Brexit. This speech provided some long-overdue details of her plans, but major questions remain to be answered. Nonetheless this is a serious offer from the British Government which the EU and member states must consider carefully.