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UK moves towards three-year Brexit transition

17/08/2017

Chancellor claims broad support in government for a period of several years in which British-EU trading relations will remain much as they are

UK government ministers this week signaled that the UK is now willing to accept the need for a prolonged Brexit transition period of several years after it leaves the EU in 2019 in which UK-EU trade relations will remain much as they are today.

Chancellor Philip Hammond today said Britain’s relationship with the EU may look similar to its current one for up to three years after Brexit, with free movement, access to the single market and an inability to strike trade deals with other countries, confirming multiple reports over the past week that the cabinet had agreed to seek a transitional period of about three years, ending before the next election, which is due in 2022.

Hammond said there was broad consensus in the cabinet that such a period would be necessary to cushion the impact of leaving the EU, The Guardian and other UK media sources reported today. It said the agreement within the UK government was reached last week, although the proposed three-year transitional period would have to be agreed by the rest of the EU.

Only after that three-year transitional period would the UK have a completely new immigration system, its own trade deal with the EU, and be able to strike trade deals with other countries, Hammond reportedly said. “There will be a process between the date we leave the European Union and the date on which the new treaty-based arrangements between the UK and the European Union which we hope and expect to negotiate come into force,” said Hammond.

The length of that would be driven by technical considerations such as how long it will take to put the necessary arrangements in place, and might be between one and three years, to “move us on a steady path without cliff edges from where we are today to the new long-term relationship with the European Union”.

Acknowledging that some Brexit supporters may be unhappy with the prospect of the UK being unable to strike trade deals with third parties for three years after leaving the EU, Hammond insisted the government was now united on this point. Immigration minister Brandon Lewis, the had caused confusion on Thursday by saying free movement would end in March 2019, but home secretary Amber Rudd  later clarified that EU migrants would still be able to come as long as they registered their presence.

Hammond confirmed free movement would probably continue until 2022. “During the transition period that will follow our departure from the European Union, European citizens will still be able to come here but they will have to register,” he said.

According to the FT, UK government ministers say the extension of the EU’s free movement principle will last at least two years, although Hammond is pressing for a longer period of possibly three years. In spite of reservations among Eurosceptic ministers that a “transition deal” could become semi-permanent, even the more pro-Brexit ministers have concluded it is unavoidable if British companies are to avoid the disruption of the UK crashing out of the EU in 2019 without an agreement between the two sides, the FT reported.

UK prime minister Theresa May has been forced to embrace a “soft” path to Brexit following the Conservative party’s poor performance in last month’s general election, which has given the upper hand to pro-business ministers such as Hammond and Damian Green, the de facto deputy prime minister, the FT reported.

UK newspaper The Express reported that Whitehall sources said Cabinet ministers want to ensure that the UK has as soft a landing as possible after Brexit whilst delivering on pledges to leave the Single Market and Customs Union. It said any such transitional measure would keep Britain at very least in the European Economic Area (EEA), but would require the acceptance of the rules of the Single Market including free movement of people in return. 

Separate reports have suggested Downing Street is prepared to accept free movement rules for up to four years after Brexit in order to avoid the “cliff edge” of a no-deal scenario. 

Earlier this month, the UK’s Freight Transport Association (FTA) reiterated its message that all parties to ensure a focus on how the UK can retain frictionless trade relationships with the EU following Brexit, arguing that a ‘no deal’ Brexit outcome was not acceptable for the logistics sector.

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