THERESA WALKS THE TIGHTROPE

PM puts Brexit on hold for two years to placate warring wings of her party and vows: Our future’s bright outside EU

THERESA May hit the pause button on Brexit yesterday as she tried to break the deadlock in talks with Brussels.

In a speech that was distinctly conciliatory to the EU, she outlined plans for a two-year transition after 2019 that could see the UK stay in the single market in all but name until 2021.

This would entail handing an extra £20billion to Brussels and accepting unchecked immigration from the EU during this period. But the Prime Minister also quelled fears within her party that this could mean Britain never leaving. Any transition would be ‘time limited’ with a clean break when it finishes, ending free movement and halting payments to Brussels.

Her speech was delivered in the basilica of Santa Maria Novella in Florence – a city chosen to underline her message that Brexit can spark a British renaissance.

She insisted this country’s future outside the EU was bright, adding: ‘Our fundamentals are

strong: a legal system respected around the world; a keen openness to foreign investment; an enthusiasm for innovation; an ease of doing business; some of the best universities and researchers you can find anywhere; an exceptional national talent for creativity and an indomitable spirit.

‘It is our fundamental strengths that really determine a country’s success and that is why Britain’s economy will always be strong.’

The upbeat message was a rebuke to Philip Hammond, whose gloomy assessment of Brexit has irritated many in the Cabinet. Mrs May also explicitly ruled out membership of the European Economic Area – an option said to be favoured by her Chancellor – saying it ‘could not work for the British people’.

Both moves were welcomed by Boris Johnson, who has clashed with Mr Hammond behind the scenes.

A source close to Brexit Secretary David Davis described Mrs May’s words on the EEA as ‘a big setback for the Remainers’.

He added: ‘They were boasting about a never-ending transition period and an EEA trading relationship – both are now dead and buried.’

But there was also a victory for Mr Hammond, who has championed the idea of a transitional deal for more than 12 months.

The deal, if agreed by Brussels, would see the UK effectively remain a member of the single market for a further two years after March 2019, when Britain leaves the EU.

This would involve budget payments of about £10billion a year, acceptance of European Court rules and the continuation of free movement in all but name.

Mrs May denied the move amounted to a betrayal. She pledged to ‘deliver on what people voted for’ in last year’s referendum.

But she said a transition period was needed to ‘ensure we do that in a way that

‘As little damage as possible’

does as little damage and disruption to our economy and people’s lives as possible’.

She said the implementation period would give business and government services like customs longer to adjust and help ensure a ‘smooth and orderly’ exit.

She said it made no sense to ask business to adjust to new arrangements in 2019 only for them to change again two years later.

The UK, she said, had ‘never totally felt at home being in the European Union’ during its four decades of membership.

Life after Brexit would be ‘different’ and the UK had no desire to wreck the EU.

‘In short, we want to work hand in hand with the European Union, rather than as part of the European Union,’ she said.

Pro-Brexit ministers in government publicly welcomed the speech. Environment Secretary Michael Gove, who jointly led the Leave campaign, described the speech as excellent and said Mrs May was ‘delivering on the wishes of the British people’.

But other Eurosceptics questioned the need for a costly transitional period.

Former environment secretary Owen Paterson welcomed the positive tone of Mrs May’s speech, but added: ‘What worries me is the transition phase.

‘Although she made it very clear that it should be of course as short as possible, as long as we have that transition period we are still bound in by European rules.

‘That delays us grasping the wonderful opportunities offered by leaving the EU.

‘I don’t see the need for it. We should tell them if they are not serious about striking a deal by Christmas then we are off.’

Fellow Tory Jacob Rees-Mogg said: ‘As long as the transition is not subject gives our businesses the certainty to the ECJ and the EU migrants they need to plan.’ don’t get permanent rights it is on Mrs May’s speech was designed the margin of acceptability.’ to break the deadlock in the Brexit

SNP Brexit Minister Michael negotiations which resume in Russell said: ‘While the Prime Minister’s Brussels next week. speech was short on detail, The Prime Minister wants to kickstart her acceptance of a transition talks on a new trade deal next period within the single market... month. But, with Brussels digging shows that the UK Government in its heels over issues like the has changed its position.’ divorce bill, Mrs May decided it was

Scottish Tory leader Ruth time to offer an olive branch. Davidson hailed the proposals as The £20billion payment plugs a ‘mature and practical’, adding: potential hole in the EU’s budget ‘There is a lot in the Prime Minister’s which runs until the end of 2020, speech for both Leavers and almost two years after the UK Remainers. leaves. But Downing Street made

‘A two-year implementation it clear that ‘cash for access’ payments period on the same terms as now will not continue beyond the transition. In answers to questions after the speech, Mrs May confirmed that she still believed ‘no deal is better than a bad deal’.

But the push for a transitional arrangement – a key demand of big business – suggests Mrs May would take the UK out of the EU without a deal only as a very last resort.

She also dropped a threat to withdraw security co-operation in the event of Brussels refusing to agree a trade deal. She said the UK was determined to continue helping to defend other European countries but would do so ‘as a sovereign nation in which the British people are in control’. And the Prime Minister offered a comprehensive guarantee to three million EU citizens living in the UK, designed to end the ‘great worry and anxiety’ some have felt.

She said their rights would be guaranteed in law. And, as an extra precaution, British courts will be required to ‘take account’ of European court rulings on citizens’ rights – although they will not be bound by them.

In a direct message to EU migrants living in the UK, she said: ‘We want you to stay; we value you; and we thank you for your contribution to our national life – and it has been, and remains, one of my first goals in this negotiation to ensure that you can carry on living your lives as before. I am clear that the guarantee I am giving on your rights is real.’

The EU’s chief Brexit negotiator Michel Barnier praised Mrs May’s ‘constructive spirit’ but said the Prime Minister needed now to put forward ‘concrete’ proposals ‘to make meaningful progress’ ahead of a key summit next month.

He said: ‘Prime Minister May’s statements are a step forward but they must now be translated into a precise negotiating position of the UK government.’

Mr Davis will go to Brussels on Monday to begin the next round of exit negotiations.

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