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19 January 2017

Lancaster House Prime Minister's speech overview

Theresa May’s Lancaster House speech has provided some long awaited direction on the type of Brexit the government are seeking.

While business and industry will see the speech as the clearest exposition yet on the government’s plans, there is a demand for further detail on what their plans mean for trade, employment, commerce and business.

May was clear that the UK’s withdrawal from the EU was not tantamount to withdrawing from Europe. However, she was also certain that the government would be prepared to walk away from any negotiations deemed unfavourable to the UK. The Prime Minister’s strict line to this effect will be tested by Brussels as negotiations progress in the coming months.

With it now confirmed that the UK government is seeking to withdraw from the Single Market and from the jurisdiction of the European Court of Justice, questions remain as to the longer term association the UK will have with the long-standing principles of the European Union.

The government is yet to provide a clear way forward for the UK’s continued relationship with the Customs Union, advocating a form of associated membership alongside a trade deal that will provide the ‘greatest possible access’ to the Single Market. Theresa May seeks to finalise a ‘comprehensive free trade agreement’ within the stipulated two-year process –this is likely to prove an ambitious aim given the complexity of trade negotiations. Again, she reiterated that it was the government’s firm intention to avoid a Customs Union relationship that precluded the UK from seeking trade deals with other countries. This may be received with hostility by Berlin, Paris and Brussels - underlining the complexity of negotiations and uncertainty the UK faces.

With the role of Parliament in the Article 50 process currently in question, subject to the Supreme Court’s judgment, May’s offer of a vote to both the Commons and the Lords will dampen criticism of Parliament being side-lined. Her pledge to backstop the UK deal with a WTO transitional arrangement will also act as a safety net in the event that negotiations do not progress sufficiently within the two year window. May also reiterated that the Great Repeal Bill would adopt the EU acquis – the body of European laws and directivesinto UK law. Following this, the government face a lengthy task to shed extraneous legislation, and repatriate current regulatory frameworks and enforcement bodies that exist under EU legislation in order to guarantee equivalency. This constitutes significant uncertainty – but also opportunity - for UK business as the legal environment shifts.

On immigration, the Prime Minister’s reassurance to EU citizens currently living in the UK, and vice versa, pledging that one of the first actions at the outset of negotiations would be to guarantee their rights to remain in their settled country, will be welcome news for many. Longer term questions remain however, on the impact of an end to freedom of movement on many of the sectors of the UK economy. The construction, healthcare and agricultural sectors to name but a few have all relied on immigration from some of the EU’s newer members in recent years, and will be keen that their voice is heard on the value of labour from the EU.  

The Prime Minister’s plan has been well received for its clear strategy and ‘common sense’ approach towards the UK’s exit from the EU. However, there remain issues which demonstrate gaps in the government’s thinking of the Brexit process. The context of a volatile global economy and unpredictable geo-political environment further complicates Brexit, and may frustrate the government’s progress towards a negotiated settlement.

As the UK moves towards Article 50 and beyond, Charles Russell Speechlys will offer unrivalled insight on the implications for our clients and on the key issues and likely outcomes for some of the most important sectors of the UK economy.

Our sector experts continue to work closely with clients to advise on the legal considerations for businesses and individuals and how best to manage their operations and investments in the short term within the current regulatory framework, and following the Article 50 and the Great Repeal Bill, where government reworks the statute books in what is likely to prove a lengthy and uncertain legal process.

“Whilst the Prime Minister may have set out the direction of travel for our exit from the EU, she is of course far from setting out the detail, with complex negotiations on the terms on which the UK and the EU could trade ahead. Establishing transitional arrangements will be tricky, particularly in areas such as energy and environmental law, where UK and EU legislation is heavily intertwined. Industry will see scope for future deregulation, but need to be clear on their short term priorities given the immense task the government and civil service face.”

Claire Fallows, Partner, Real Estate