Theresa May, U.K. prime minister, gestures as she delivers a speech on Brexit at Mansion House in London, U.K., on March 2, 2018. (Photographer: Chris J. Ratcliffe/Bloomberg)

Theresa May Tells Her Tories to Get Real in Key Brexit Speech

(Bloomberg) -- Prime Minister Theresa May’s landmark Brexit speech sent a message to the warring factions in her Conservative Party: the U.K. won’t get everything it wants in the negotiations and she’s prepared to put business interests and jobs ahead of ideology.

“We need to resolve the tensions between some of our key objectives,” she said in the speech in London. “We both need to face the fact that this is a negotiation and neither of us can have exactly what we want.”

In the 20 months since the referendum, the focus of the debate has been on deciding what Brexit should mean, and little progress has been made in negotiations with Europe.

With just a year to go until Britain leaves the EU, talks on the future relationship are about to start and May needs to get her divided team behind her at last. The only proposal her Cabinet has been able to agree on is something the EU has already rejected. The speech is probably aimed more at the domestic audience than at EU officials, who were underwhelmed.

As Bloomberg reported on Feb. 24, May blurred a key red line she has long held onto: that of the role of the European Court of Justice, a symbol of lost sovereignty for Brexit backers.

May said she wants the U.K. to get observer status at some key EU industry regulators, opening the door to a role for the ECJ, albeit a much diminished one compared with now. This would affect chemicals, aviation and medicines, which are regulated at an EU level.

Pragmatism

“We will also want to explore with the EU, the terms on which the U.K. could remain part of EU agencies such as those that are critical for the chemicals, medicines and aerospace industries: the European Medicines Agency, the European Chemicals Agency, and the European Aviation Safety Agency," she said. “We would, of course, accept that this would mean abiding by the rules of those agencies and making an appropriate financial contribution.”

An official in May’s office told reporters the speech showed the prime minister is being pragmatic rather than theological. She doesn’t believe walking out of talks would help get a deal.

“We will not be buffeted by demands to talk tough or threats to walk out," May said in the speech. The pound was little changed.

Foreign Secretary Boris Johnson, a figurehead of the Brexit campaign, tweeted his support, and Nicky Morgan, a pro-EU Conservative who has rebelled against the government to keep ties as close to Europe as possible also signaled support.

While generally hitting a conciliatory tone toward her European counterparts, she hit back at EU criticism that she’s trying to cherry pick, saying she doesn’t want a deal that reflects an imbalance of rights and obligations.

She’s prepared to keep U.K. regulations in step with those of the EU, and defended her demands for a deal that’s better than the one Canada has.

Speaking to the EU, she continued to press for an outcome that the bloc has long rejected. The EU says the single market is indivisible, while her approach suggests she wants better access for some sectors than others. And her proposal for the future customs setup will be hard for the EU to accept.

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She rejected staying in the customs union-- which the Labour party and some Conservative EU rebels want -- and instead set out options for a customs arrangement that would keep trade as frictionless as possible. She wants no tariffs or quotas on goods from the EU. But she also wants to be able to pursue an independent trade policy -- something that isn’t allowed in the EU’s standard customs union.

©2018 Bloomberg L.P.

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