Prime Minister Theresa May laid out her plan for life outside the Single Market yesterday, warning Brussels that she will walk away from negotiations if the EU seeks to damage the UK by blocking a free trade deal.
While May’s threat sent jitters through the City, business groups were heartened to hear the PM promise “a bolder embrace of free trade” post-Brexit, calling on EU negotiators to embrace Britain – “a great, global trading nation”.
In a stark warning to any EU members who could prove unwilling to play ball, May said she would fall back on WTO rules if necessary, adding: “No deal for Britain is better than a bad deal for Britain.”
The PM had suggested previously that Britain would leave the Single Market – but yesterday’s speech was the first time the government explicitly confirmed the plan.
Nonetheless, the City reacted positively when it emerged that May’s vision for a hard Brexit came with some softer edges, including a vote in parliament for the final deal and the promise that a “phased process of implementation” or transition deal would be raised during negotiations in a bid to avoid a disruptive “cliff edge” scenario.
Sterling surged, achieving its biggest intraday rise against the dollar since 2008, as markets welcomed greater clarity on Brexit.
Speaking in front of a slew of cabinet members and diplomats at Lancaster House, May also said she wanted to negotiate a customs agreement with the remaining 27 EU states, and that she had an “open mind” over whether this would be through associate membership of the customs union or through some other arrangement.
“Clear and positive speech by Number 10. Constructive approach to implementation arrangements positive for all parties,” tweeted Xavier Rolet, head of the London Stock Exchange.
Iain Anderson, executive chairman at lobbying firm Cicero Group, added: “This is details, this is comprehensive… the one thing that business hates is uncertainty. The idea of leaving the Single Market was always hinted at, but it wasn’t entirely believed until people actually heard the words fleshed out in the way the Prime Minister has done today.”
Read more: Sterling rockets on Theresa May speech
“The clarity is helpful and at least we now know what the business case is,” added a source at a leading bank.
Brexit expert Shanker Singham, director of the Legatum Institute Special Trade Commission, said his organisation was “excited by the vision she has outlined”.
Sky News reported that May will now meet bosses from Wall Street giants in Davos, for talks on what a so-called hard Brexit means for the financial sector.
Allie Renison of the Institute of Directors added: “While we do not expect a running commentary, firms hope to get periodic updates to maintain confidence as we make our way towards the exit.”
The PM spoke to German Chancellor Angela Merkel and French President Francois Hollande after yesterday’s speech, as well as European Council president Donald Tusk. Tusk said he “looked forward to negotiating in a spirit of good will once the UK had triggered Article 50,” according to Downing Street.