U.K. Cabinet Backs May’s Plan for Soft Brexit: Highlights

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U.K. Prime Minister Theresa May emerged with a victory after a lock-in with her Cabinet to thrash out a common Brexit position to take back to the European Union.

It’s her most detailed vision yet and critically, she says, her top ministers have signed off on it.

The risk of course, this being a highly-charged debate, is that it could all backfire if the pro-Brexit faction in her Conservative Party decide they can’t accept it. Here are the key takeaways in May’s own words and in a three-page document her office released.

Solution to Northern Irish riddle is one May wanted all along

The document refers to a new ‘Facilitated Customs Arrangement’ that would essentially have the U.K. act as the EU’s tax collector. “The U.K. would apply the U.K.’s tariffs and trade policy for goods intended for the U.K., and the EU’s tariffs and trad policy for goods intended for the EU - becoming operational in states as both sides complete the necessary preparations.”

“In this context, we also noted that this proposal should allow both parties to resolve the remaining Withdrawal Agreement issues, including the ‘backstop.”’

‘Common rulebook for all goods’

“Our proposal will create a U.K. - EU free trade area which establishes a common rule book for industrial goods and agricultural products.”

It’s not good for services

“We would strike different arrangements for services, where it is in our interests to have regulatory flexibility, recognizing the UK and the EU will not have current levels of access to each other’s markets.”

Step up preparation for ‘no deal’

“We concluded that it was responsible to continue preparations for a range of potential outcomes, including the possibility of ‘no deal.’ Given the short period remaining before the necessary conclusion of negotiations this autumn, we agreed preparations should be stepped up.”

Onto the trade deals...

May insists that the “new business-friendly customs model” gives the U.K. freedom to strike new trade deals around the world. Her trade secretary, Liam Fox, wanted personal assurances on this and she put it down on paper. However, the deals will have to bee on services as the government has tied its hands on goods (see above).

The document says the U.K. would have its own seat at the WTO and that it could potentially seek access to the trade pact known as the Trans-Pacific Partnership (the one the U.S. pulled out of.)

Immigration

This was a hot topic, and a key one for pro-Brexit supporters who wanted to end the freedom of movement. The outline sets it out on paper. But suggests a “mobility framework’ so that U.K. and EU citizens can “continue to travel to each other’s territories, and apply for study and work.”

European Court of Justice

This was another red line for many so-called “Brexiteers” - the document commits U.K. courts to paying “due regard” to the ECJ.

Financial Services

It’s confirmed that “passporting” will be gone. But critically there was no mention of the "mutual recognition” proposal it has previously made for financial services. The U.K. recognizes the U.K. and EU will not maintain the same level of access to each other’s markets for services after the split.

©2018 Bloomberg L.P.