On 17 January 2017, UK Prime Minister Theresa May delivered a long-awaited speech setting out her 12-point vision for Brexit. It was not lost on some that the speech was given at Lancaster House in London, where Margaret Thatcher, the UK's only other female Prime Minister, gave a speech in April 1988 launching her "Europe Open for Business" campaign.

In summary:

  • The UK is to leave the EU single market.

  • UK to seek bespoke tariff-free trade and customs agreement with the EU, whilst separately looking to negotiate free trade deals with third countries.

  • End of free movement of people into the UK from the EU.

  • The jurisdiction of the European Court of Justice would no longer extend to the UK.

  • An end to the UK's "vast contributions" to the EU.

  • Some continued collaboration in areas such as science and research, and defence and foreign policy (and NATO).

  • Prime Minister May saying "no deal" (and WTO terms) preferable to a "bad deal" with the EU.

The most fundamental point to note from Mrs May's speech is that the UK will leave the EU single market. Mrs May has said that the UK will not attempt to adopt a model used by others – such as membership of the European Economic Area – and that, in any event, continued membership of the EU single market would require continued UK acceptance of, amongst other things, freedom of movement within the EU, rejection of which by a majority of the British people was in her view one of the key take-aways from the "Leave" vote in the UK referendum on 23 June 2016.

Recognising however that the EU will remain an important trading partner for the UK after Brexit, and stating that the UK does not seek to undermine either the EU or the EU single market, Prime Minister May went on to say that in the forthcoming negotiations with the EU the UK will seek tariff-free trade and a customs agreement with the EU, to allow the maximum possible freedom for UK businesses to trade in the EU and for EU businesses to trade in the UK. In this regard, there have already been some suggestions that there could be a "special deal" of some kind for the City of London and/or the automotive industry.

Outside the EU, the UK, a "great, global trading nation", would nevertheless seek to remain on the world stage. For the first time since joining the European Economic Community, the EU's predecessor, in the 1970s, after Brexit the UK would be free to sign its own trade deals with non-EU nations. Whilst we are, of course, a long way from knowing the detail of any possible arrangements, it has been widely reported that, for example, Mr Trump's US Government will apparently be far more willing to discuss a free-trade agreement with the UK than the outgoing administration of President Obama appeared to be.

Having left the EU single market, the UK would no longer be subject to the EU principle of freedom of movement and Mrs May has said she would be aiming to take back control of immigration rights of EU citizens in the UK and of UK citizens in the EU. As yet, there is no agreement on the position of the several million EU citizens currently living and working in the UK nor on that of the many UK citizens currently living and working elsewhere within the EU; but it is understood that Prime Minister May wants to guarantee rights for EU citizens in the UK as early as possible, as long as that is reciprocated for UK citizens in EU countries.

Furthermore, after Brexit the UK will cease to be subject to the jurisdiction of the European Court of Justice, although Mrs May has said that the UK will keep, and "build on", EU workers' rights laws, albeit within UK law.

Prime Minister May also used her speech to stress that, in some areas, the UK will remain close to, and continue to collaborate with, Europe as a "good friend and neighbour", including:

  • maintenance of the common travel area between the UK and EU member the Republic of Ireland, finding a "practical solution" to issues arising from the UK's only land border with the EU, provided this does not affect immigration to the British mainland;

  • continued "practical" sharing of intelligence and policing information;

  • ongoing collaboration with EU projects on science, technology and research; and

  • continued close ties over defence and foreign policy, with the UK maintaining its role within NATO.

Mrs May added that the UK's departure from the EU single market is expected to lead to an end to the UK's "vast contributions" to the EU budget, although the UK may choose to make an "appropriate" payment to the EU where it remains a member of one or more EU schemes by choice.

Assuming a deal can be reached between the EU and the UK during the two-year negotiating period following service of the UK's Article 50 notice, Mrs May said she envisaged a finite "transition phase" before full implementation of the deal.

The Prime Minister made clear that she is not planning to give the UK Parliament or anyone else a running commentary on the Brexit negotiations but will give both UK Houses of Parliament a vote on the final terms of any agreement reached with the EU. She went on to say, however, that "no deal" would be better for the UK than a "bad deal", and so it appears that the UK Government is prepared to fall back onto WTO trading terms if the UK Parliament rejects the terms of any deal reached with the EU. Mrs May also warned the EU against trying to punish the UK for having had the temerity to leave the EU, saying this would be an act of "calamitous self-harm" for the countries of Europe and "it would not be the act of a friend". It remains to be seen whether the EU will respond in kind to the generally positive tone of the UK Prime Minister's speech.

Prime Minister May's speech ends a period of uncertainty and speculation in which her government has been accused in some quarters of not having a plan for Brexit and of being unwilling to share its objectives for the forthcoming negotiations with the EU. Nevertheless, the stance Mrs May has set out in her speech is not universally popular, with Tim Fallon (Leader of the Liberal Democrats) and Jeremy Corbyn (Leader of the Labour Party) both critical of her approach. In addition, Scotland's First Minister, Nicola Sturgeon of the Scottish National Party, has said that the UK Prime Minister's plans to take the UK out of the EU single market brought a second Scottish independence referendum "undoubtedly" closer.

The UK Government also has to contend with an election in Northern Ireland – which, as a province, voted to "Remain" by 56% to 44% – and the UK's Supreme Court's verdict in the "Brexit case", R (on the application of Miller and Dos Santos) v Secretary of State for Exiting the European Union, which many commentators expect the UK Government to lose, likely requiring legislation approved by both UK Houses of Parliament before the UK Government can serve the Article 50 notice needed to commence the two-year "divorce" discussions with the rest of the EU. And whilst the falling pound helps exports – and those overseas buyers looking to conduct M&A activity in the UK – it is beginning to have an inflationary impact on the UK's weekly shopping basket.