The IEA's Brexit Unit comments on the Prime Minister's Florence Speech

Commenting on the Prime Minister’s Florence Speech, Julian Jessop, Chief Economist at the Institute of Economic Affairs, said:

“Mrs. May’s upbeat Brexit speech provided some welcome clarity on the UK’s preferred transitional arrangements and puts the ball back firmly in the EU’s court.

“The offer to pay the UK’s EU contributions until the end of 2020 is fair and reasonable – and consistent with what the IEA Brexit Unit proposed back in June. But the UK must get something in return. The Prime Minister is linking this offer to a two-year transition period retaining the main elements of both the Single Market and the Customs Union. This period should be long enough to agree a comprehensive free trade deal and ease fears about a cliff-edge Brexit.

“The details of the transition still need to be negotiated. The entire world has ‘access to the Single Market’, so for this to be worth paying for the UK’s access must be tariff-free. This begs the question of the obligations that will come with this – including free movement and accepting EU regulations.

“Similarly, continued membership of some form of Customs Union might minimise non-tariff barriers. But it would delay the point at which the UK can implement its own free trade deals with the rest of the world, or be able to lower prices for UK consumers by cutting tariffs on imports unilaterally.

“A two-year wait here is not a game-changer. Nonetheless, the UK’s long-term future should lie outside both the Single Market and the Customs Union. Compared to this, the precise amount of the financial settlement or the length of the transition period are a sideshow.”

Notes to Editors:

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