Britain plans total break with EU, May says in Brexit speech

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British Prime Minister Theresa May has provided the clearest signal yet that Britain's future lies entirely outside of the European Union, saying the EU no longer reflects the country's way of life.

In a long-awaited speech about Brexit on Tuesday, Ms. May outlined plans to go much further than many expected in cutting Britain's ties with the EU, announcing that the country will essentially withdraw from every EU cornerstone including the single market, the customs union and the European Court of Justice. Instead, she said Britain will negotiate comprehensive free-trade agreements with the EU and other countries including Canada.

Ms. May's comments marked a historic shift by Britain away from the EU and they raised questions about the future of the union. And in a sign of how fractious the departure could become, Ms. May warned EU leaders about trying to punish Britain for leaving.

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Her message to the country and Europe was that Britain was going on its own, ending more than 40 years of difficult relations with Europe and setting the framework for a new relationship based almost entirely on trade.

"I want us to be a truly global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe, too," Ms. May said.

Business leaders generally welcomed her clarity on Brexit and sterling jumped 2.8 per cent against the U.S. dollar. But many analysts expressed concern over how long it will take to negotiate a trade deal and whether it will offer anywhere near the same kind of access to the EU market. Ms. May also faces a host of other challenges including disgruntlement in Scotland and an upcoming Supreme Court ruling that is expected to give Members of Parliament more say over Brexit. There is also growing discord in Europe over free trade and several upcoming elections on the continent that could dramatically alter trade talks.

Ms. May's speech was clearly aimed at Europe and she stressed that a new trade deal will benefit both sides and that Britain wanted the EU to succeed. But she also outlined Britain's long frustration at the EU, noting that British traditions and institutions were just too different and suggesting that the EU has been too inflexible, too unwilling to accept diversity and constantly bending toward uniformity. And she warned that other EU countries feel the same.

"Britain is not the only member state where there is a strong attachment to accountable and democratic government, such a strong internationalist mindset, or a belief that diversity within Europe should be celebrated. And so I believe there is a lesson in Brexit not just for Britain but, if it wants to succeed, for the EU itself," she said.

There was also a warning not to punish Britain by taking a hard line on trade negotiations. "I know there are some voices calling for a punitive deal that punishes Britain and discourages other countries from taking the same path. That would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend," she said.

Ms. May had been under pressure for months to outline her plans for Brexit and clear up confusion over whether Britain would remain in the single market, which provides for the free movement of goods, services and people among EU members. Many business groups have been concerned about giving up that access, fearing Britain would be hard-pressed to negotiate better terms in a trade deal. Financial firms in particular have worried about losing so called "passport" provisions that allow firms to set up in London and provide services across the EU. EU officials have made it clear that remaining in the single market requires accepting free movement of people, something Ms. May said on Tuesday that she cannot accept.

She did offer hints that Britain will push for free-market access for financial-services firms and auto makers. And she indicated the government is open to a transitional arrangement that would avoid companies suddenly facing a wall of EU tariffs once the U.K. left the EU.

While business groups welcomed Ms. May's position, many expressed caution, too, saying negotiating a deal with the EU won't be easy.

"It is very important now that we go into these negotiations aiming for an all-encompassing free-trade arrangement and do whatever can be done to head off the risk of falling back into [World Trade Organization] regulations," said Carolyn Fairbairn, director general of the Confederation of British Industry.

Added Allie Renison, head of Europe and trade policy at the Institute of Directors: "We now know that we will be leaving the single market, and while there will be firms who regret this, they will at least be able to plan on that basis."

EU leaders also welcomed Ms. May's remarks, saying they laid the groundwork for the start of talks. Donald Tusk, who heads the European Council that represents EU leaders, said in a tweet that it was a "sad process, surrealistic at times but at least more realistic announcement."

There remain many pitfalls ahead of Ms. May. She has promised to trigger the EU exit mechanism, Article 50 of the Lisbon Treaty, before the end of March, starting a mandatory two-year negotiating period to conclude a new arrangement with the EU. Ms. May insisted on Tuesday that she plans to keep to that timetable but few believe that's possible given the scope of the trade deal she envisions. Some analysts cited Canada's experience with the Canada-EU trade deal that has dragged on for nearly 10 years and was almost scrapped because of a vote in the Belgium region of Wallonia.

"As we saw with Wallonia and the Canadian-EU trade deal there are risks of delays – in any case Canada's own trade deal took seven years to negotiate. We also have to consider that the election calendar in Europe is not particularly helpful in this process," said James Knightley, senior economist at ING in London.

Ms. May must also deal with a restless Parliament, where her Conservative government has a slim majority and most MPs opposed Brexit. The Supreme Court is expected to rule within days on whether Ms. May can trigger Article 50 on her own or if she requires approval from Parliament. The court is expected to side with Parliament, giving MPs more of a say in the Brexit process. On Tuesday Ms. May promised a vote on the final trade agreement with the EU, but that may not come until after the next election. MPs raised concerns Tuesday about leaving the single market and in Scotland, First Minister Nicola Sturgeon called Ms. May's plans "economically catastrophic" and threatened to push for a second referendum on independence if Scottish issues weren't addressed during Brexit talks.

Ms. May tried to address those concerns on Tuesday, calling on the country to unite and end the disharmony over the referendum. It is time to accept that a majority of people voted to leave the EU, she said, "and they did so with their eyes open: accepting that the road ahead will be uncertain at times, but believing that it leads towards a brighter future for their children – and their grandchildren, too."