Britain to seek tailored free trade deal with EU, May says

Theresa May has told her cabinet that Britain will seek a bespoke free trade deal with the European Union after Brexit, combining maximum access to European markets with the freedom to set its own rules and agree new trade deals with other countries. Chairing the first cabinet discussion of the shape of the final Brexit deal, the prime minister said Britain should be creative in shaping its proposal.

“The prime minister said it was clear what the cabinet’s objective is: a deal which secures the best possible trading terms with the EU, enables the UK to set rules that are right for our situation and facilitates ambitious third-country trade deals,” her official spokesman said.

"The prime minister said she had been clear in her Florence speech that a European Economic Area model would not be right for Britain and would be democratically unsustainable, because it would mean automatically adopting all EU rules without influence or a vote. She also said the UK would also be seeking a significantly more ambitious deal than the EU's agreement with Canada. "

The EU's chief negotiator, Michel Barnier, has said repeatedly that a bespoke deal will not be available to Britain, arguing that Ms May's negotiating red lines mean that the only viable option is a free trade deal similar to Canada's. The EU-Canada Comprehensive Economic and Trade Agreement (Ceta) offers tariff-free trade in goods but only modest market access for services, which make up 80 per cent of the UK's economy.

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Financial services

The prime minister’s official spokesman dismissed Mr Barnier’s comments as an opening bid in the negotiations and expressed confidence that Britain would secure a good deal for its financial services sector.

“This is the beginning of the phase-two negotiations. You would expect the commission to be setting out their position. I would imagine you will hear a lot more from them before you hear less,” he said.

“As we have said throughout, we are confident of negotiating a good deal for financial services and, as we have always been clear, that will be in the EU’s interest as well as ours.”

Twenty-five ministers spoke during the cabinet's discussion of Brexit, with Northern Ireland secretary James Brokenshire the only cabinet member not to attend.

The former head of MI6, John Sawers, told MPs on the foreign affairs committee on Tuesday that Brexit would lead to a loss of global influence for Britain. He compared it to the country's experience during the 1970s, when it underperformed other major western economies such as France and Germany.

UK devaluation

“We have to acknowledge that Brexit is damaging our economy at the moment. Immediately after Brexit, we suffered a 15 per sent devaluation in our currency – we devalued all the assets in the UK by 15 per cent,” he said.

"We are going through a Brexit inflation at the moment which means that people's pay rises are not enough to keep up with real-terms incomes and, having 18 months ago been at the top of the G7 table of GDP growth performance, we are now at the bottom, so we are undoubtedly going through a bit of a dive. At the end of this process, we will need to work out how to rebuild our economy and our influence in the world."