Prime Minister Theresa May’s speech in Florence today is expected to be her biggest announcement on Brexit since January, when she committed to leaving the single market.
She is attempting to break the deadlock in negotiations with the European Union after three previous rounds of talks in which little has been agreed.
According to the BBC, one minister said May plans on making an “open and generous offer” in her speech. However, another cabinet minister has warned against the UK offering too much money to the EU, saying, “it’s our only leverage.”
Time is running out
The timespan for a Brexit deal is two years. The UK now has 18 months left to negotiate a deal with the EU after May triggered Article 50 in March.
However, European Chief Negotiator for Brexit Michel Barnier, has said the Article 50 deal will have to be negotiated by October 2018 to give the European Parliament time to vote on it. This would leave the UK with 12 months left to agree on its divorce bill which the EU says must be settled before it will negotiate citizen’s rights, trade agreements and law and immigration policies.
After three rounds of monthly talks the UK is yet to agree on this.
If, after the two year period for Brexit, no deal is reached the UK will automatically revert to World Trade Organisation (WTO) trading rules. This would mean the UK would have to pay tariffs on goods and services it exported into the EU. Economist from the Centre for European Reform John Springford estimates these costs would range from 2.2 percent to 9 percent of UK GDP.
Take back control
Theresa May’s Brexit speech has significance beyond the EU. What she says will potentially split her cabinet, which is already divided on the UK’s relationship with the EU.
May’s Conservative Party lost its majority in June after deciding to call a snap election and Foreign Secretary Boris Johnson recently published a 4,000-word article promoting a hard Brexit. Some commentators say she needs to set out her own position and get her cabinet and party to unify behind a vision.
Why the EU cares
If the UK left the EU without paying anything towards a divorce bill it would leave a £20bn black hole in its budget, according to the BBC’s political editor. Although it seems unlikely the EU would agree to this, as it gets closer to the UK leaving the EU, it will want confirmation that the UK at least intends to contribute something towards the bill.
Clarification for the public and opposition
So far May has refused to clarify the kind of deal she is after. Just a few days ago in Canada she said she wanted a “bespoke” deal. She has said the UK will no longer be in the single market (which eliminates tariffs on goods) but she still wants frictionless trade and an end to freedom of movement (the ability for EU citizens to move freely between EU countries) – something the EU has said is not possible.
She recently declined an invitation from the President of the European Parliament, Antonio Tajanito, to publicly address the elected European representatives of Parliament.
Pressure is mounting on May to clarify her government’s position after the Labour Party has said it wants to stay in the single market and customs union for a transitional period.
May’s former co-chief of staff, Nick Timothy, says nobody should expect an “immediate breakthrough.”
“In public, the Europeans will be surly. Expect negative briefing from the commission, sarcasm from Guy Verhofstadt, and a polite but not positive reply from Michel Barnier and Jean-Claude Juncker.
“Offering to pay an exit bill … should prompt further talks that will get the negotiators to stage two.”