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If delays in policy, that is, limbo, are worse than bad policy, then British Prime Minister Theresa May's speech did Britain and the European Union a favour on Tuesday. She said, in no uncertain terms, that Britain will make a clean break from the EU – goodbye common market – and go it alone while it negotiates trade and customs deals with the remnants of the EU and everyone else beyond the English Channel fog.

The deluded notion that Ms. May might have endorsed a "soft Brexit," a halfway house whose definition was never pinned down, proved to be exactly that – deluded. Britain is going – "no partial membership," she insisted. While the 48 per cent of voters who endorsed the EU in the June referendum, and the banks and the FTSE-100 companies, have dreaded a hard Brexit, at least they all know it's coming and can plan for it.

In this sense, Ms. May's speech was a blessing. Note that the pound, which fell sharply in the days before her speech, rose on Tuesday morning ahead of it, a sort of relief rally later buoyed by her confirmation that the Brexit deal would go to a parliamentary vote. By the end of the trading day, it had climbed almost 3 per cent, the biggest gain since 2008 (even the euro was up). The worst may be over for sterling.

Confirmation of a hard Brexit will appease the Britons who wanted their country to reclaim full sovereignty, notably control over Britain's borders and immigrations levels, from the EU even if they are aware that exodus means some economic pain down the road. The postreferendum economy has remained strong – much to the annoyance of the anti-Brexit crowd, who had predicted calamity – but that cheery status may not last.

While Ms. May's speech ended the speculation about a soft Brexit and outlined her wish list, notably a "bold and ambitious" new trade agreement with the rump EU,wishing does no mean getting. The risks of a messy exit and difficult trade negotiations with the EU remain as high as ever.

Her optimism for a pleasing new free trade and customs deal with the EU centred on her belief that the EU trade negotiators will be "economically rational," that is, they would recognize that a trade deal that proves damaging to Britain would also damage the EU, since Britain is a big market for everything from German BMWs to Italian furniture. A punitive agreement, she said, "would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend."

The flaw in the argument is her belief that EU negotiators will avoid making an example of Britain. But they might. If the EU were to give Britain all the advantages of EU membership with none of its disadvantages, you can bet the remaining member states would demand me-too treatment. Were that to happen, the EU project would be pointless.

Ms. May also seems to forget that Britain needs trade with the EU more than the EU needs trade with Britain. About 45 per cent of Britain's exports go to the mainland EU countries, while about 15 per cent of their exports go to Britain (the numbers vary, depending on how the exports are measured, but the proportion is roughly accurate). The point being, the whip hand in the negotiations will belong to the EU, not Britain.

Although Ms. May insisted she was "confident" that the EU would play nice, she implicitly admitted that she had a back-up plan if the EU chose not to. She did so by threatening, in effect, to use "competitive tax rates" to turn Britain into a tax haven. Forgive us for thinking that those sounded like fighting words.

The second flaw in Ms. May's argument is that she assumes a new trade deal with the EU can be negotiated within two years of the formal start of the Brexit process, which will happen in March, when Britain triggers Article 50, the EU's escape clause.

This is fantasy. The deal has to be negotiated to both sides' satisfaction, followed by approval in all 28 of the EU's national parliaments, including Britain's. As ING economist James Knightley noted, "the election calendar in Europe is not particularly helpful to this process." Indeed, France and Germany, and probably Italy, will hold elections this year and politicians and negotiators in those countries might bury the Brexit file. Getting re-elected is more important than pleasing Ms. May.

Canada has a new trade deal with the EU called CETA. It took seven years to negotiate. This is not to say that the negotiations between Britain and the EU will consume seven years, or more, but Ms. May's two-year horizon seems hopelessly optimistic.

The good news for British and EU businesses and industry is that Ms. May has removed any doubt that a soft Brexit is an option. It's not and probably never was, even though Ms. May herself had campaigned against Brexit. But her misguided prediction for pleasant trade talks keeps another type of uncertainty intact. Any business would be foolish to assume that bolting from the EU and re-engaging with it will pain-free. It won't and that's the price Britain will have to pay to keep the immigrants out.

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