For those who have been listening carefully to the UK Government in recent months, today's speech by Prime Minister Theresa May will be a confirmation that the UK Government has recognised the logical consequences of the political commitments it has made — and an indication of its aspirations for an economic pact that works for the UK and the EU.

The clear focus on minimising barriers to trade in key sectors based on regulatory standards and reciprocity provides a conceptual framework for negotiation. The acceptance of the importance of a period of implementation provides an indication of how practically it might be delivered. But the route to success is tricky. It will need political will, and political skill, to reach a deal, and implementation will give rise to complex legal, regulatory and commercial issues. Businesses and their advisors will have to play their part in making it work. Five things we have learned about the UK Government's plans:

No membership, no existing models – it is bespoke Brexit

Theresa May has made clear that the UK Government is committed to:     

a) UK control over immigration from the EU;      

b) an end to big budget contributions to the EU;     

c) an end to the CJEU having "direct legal authority" in the UK; and      

d) the ability to do trade deals with the rest of the World.

The logical consequence of these commitments is that, in political terms at least, the UK cannot remain a member of the Single Market or the Customs Union.  

All about access

The economic focus is on securing on-going trade without tariff or regulatory barriers in key sectors.

Regulatory continuity and reciprocity are key

These are the foundations on which barrier-free trade between the UK and the EU should continue.  What that means is that the intention to incorporate existing EU laws and rules into domestic law (through the Great Repeal Bill) might point to a long-term future of close regulatory cooperation and alignment.  However, it faces at least two challenges.

  • First, even continuity will require choices to be made and agreements with the EU to be struck – because important aspects of the existing regime require and assume the involvement of EU institutions and other member states.
  • Secondly, maintaining sufficient regulatory alignment will need new mechanisms that do not offend the demands on both sides for control.   This may point to an on-going role for the CJEU in specific areas in policing the agreement (note the Prime Minister's careful reference to concerns about it having "direct" jurisdiction) or to a specialist arbitral tribunal or committee established jointly by the UK and EU. 

Phased implementation, not transitional period

While a transitional period raised Brexiteer fears of the long grass (or "permanent political purgatory" as Mrs May put it), a phased implementation is the UK Government's preferred means of avoiding the regulatory cliff-edge.  What is new in this proposal is the suggestion that the implementation period will differ depending on the subject. In other words, it will not be an extension of the status quo but an action plan for delivering change.  This will be crucial to protecting the interests of those affected on all sides while putting into effect both a new deal with the EU and a reformed domestic regulatory environment where that deal allows.

Going global

The UK Government will need to demonstrate that staying out of the Customs Union (and therefore the Common Commercial Policy and the external tariffs that it requires) truly allows it to be a global trade player.  What remains unclear is how quickly the UK can make any progress on this front, given the restrictions of EU membership until Brexit and the history of lengthy negotiations on any international trade agreement, and how much leeway it can expect to negotiate under a customs agreement with the EU.