May Dials Back Hope for Swift Brexit Bridge Sought by Business

U.K. Prime Minister Theresa May dialed back expectations that a swift Brexit transition deal can be reached with the European Union, signaling that any arrangement to ease disruption from the divorce would only be agreed on as part of a broader accord.

Businesses stepped up their calls Monday for an urgent deal with the EU that would allow them to trade as usual for two years after Brexit. But May signaled that the transition would be part of the wider agreement that isn’t expected to be finalized until shortly before Brexit day in March 2019.

“Everybody has always been clear that we are looking to wrap all this up in one single go; everything will be agreed at the same time,” the prime minister’s spokesman, James Slack, told reporters in London. “The point of an implementation period is it’s a bridge to where you’re headed, so you need to know where you’re headed to finalize that implementation period.”

Asked by several lawmakers in the House of Commons a few hours later whether that was indeed her position, May avoided answering the question directly, saying only she was confident the U.K. would get a good deal. The transition is about “practical arrangements to reach the future partnership; you don’t know what those practical arrangements are until you know what that future partnership is,” May said.

The comments mark a change in tone from previous statements from Chancellor of the Exchequer Philip Hammond that businesses need a transition deal urgently and its value to them depends on getting it soon. May’s words bring her closer to the position of the European Commission, which has long held that a transition deal can’t be a “bridge to nowhere.”

Florence Proposals

May first set out her vision for a transition in her Brexit speech last month in Florence, Italy, saying she would seek a two-year period during which trading rules and regulations will remain the same, so that businesses only have to make one set of changes to adapt to Brexit. Linked to that request, she proposed paying into the EU budget for two years after the divorce. On Monday, she said the terms of the transition should be as close as possible to those currently applying.

German Chancellor Angela Merkel has been skeptical about how a transition would work, indicating that the final destination needs to be clear before such an arrangement is put in place.

May was speaking in Parliament to update lawmakers on the EU summit she attended last week, at which she was encouraged by counterparts including Merkel that Brexit talks could move on to trade negotiations in December -- as long as the U.K. team improves its offer on the financial settlement to the bloc as part of the divorce. EU members agreed to start discussing among themselves the future relationship so they would be ready to start talks on trade and the transition in December if leaders approve.

Five business organizations have written to Brexit Secretary David Davis calling for an “urgent” transition deal that keeps rules as close as possible to the way they are now, according to Sky News.

“We are seeing evidence in the here and now of the challenge of uncertainty,” Confederation of British Industry Director-General Carolyn Fairbairn told BBC Radio before May spoke. “The key thing that would unlock that uncertainty would be a transition deal agreed rapidly.”

While business lobbies are calling for a quick deal on transition, major financial institutions haven’t been waiting around. Banks including Citigroup Inc. have already applied to EU regulators for permits, while others such as Goldman Sachs Group Inc. have signed leases on new offices outside Britain. Goldman Sachs Chief Executive Officer Lloyd Blankfein tweeted last week that he would be spending more time in Frankfurt. Royal Bank of Scotland Group Plc Chairman Howard Davies has said the moves will accelerate unless there’s clarity by the first quarter of next year.

— With assistance by Ian Wishart

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