May offers some concessions in bid to avoid messy divorce

Theresa May was never likely to break the deadlock in Brexit negotiations with a single speech and the "cautious welcome" from Leo Varadkar may be as good a review as she gets from other European Union leaders.

But her speech in Florence could be an important moment in the post-referendum politics of Brexit, as the prime minister outlined to the British public some of the compromises ahead.

This was the first official statement that Britain will seek a transitional arrangement based on the status quo after it leaves the EU in March 2019. Britain and the EU would access each other’s markets on current terms on the basis of “the existing structure of EU rules and regulations” during this period.

This means that Britain would continue to follow EU rules, including on the free movement of people, after it ceases to have a voice in Brussels.

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Significantly, the prime minister declined to specify how long the transition should last, although she said it must not be permanent and suggested it might be about two years.

During this time, Britain would continue to pay into the EU budget, so that no other member state will have to pay more or receive less over the remainder of the current EU budget plan.

In an important concession, the prime minister said that Britain “will honour commitments we have made during the period of our membership”. This opens the way to Britain contributing to the cost of programmes agreed before it leaves but not implemented until after Brexit.

All of this goes some way towards meeting the divorce bill the EU is demanding from Britain, although the financial negotiations are likely to continue until the very end.

May also offered a concession on EU citizens' rights, promising to ensure that British courts would protect them from any future political changes. She had little new to say about Ireland but Britain and the EU have made progress on the Common Travel Area and issues surrounding the Belfast Agreement.

The Border remains the most difficult issue and it will not be fully resolved before the shape of Britain’s future customs relationship with the EU becomes clearer.

If May sketched out in detail the terms of her preferred transitional deal, she was more opaque about what she hopes Britain’s final relationship with the EU will be.

With her cabinet divided between those who favour something like membership of the European Economic Area (EEA) and those who prefer a version of the EU-Canada trade deal, the prime minister rejected both options.

The EEA option would involve Britain adopting EU rules it had no role in shaping, which May rejected as an unacceptable loss of democratic control. But she said a Canadian-style deal would not offer sufficient market access and would not take into account the fact that Britain and the EU were starting from regulatory conformity.

May’s speech will not unblock the negotiations in Brussels when the two sides meet next week and she has left unresolved the dispute that threatened to blow her cabinet apart this week, over Brexit’s final destination.

But she has set Britain on course for a transition that will retain the status quo until 2021, giving citizens and businesses two more years to adjust and politicians more time to address problems like the Border.