May unveils UK soft Brexit blueprint, but banks are cut loose

[LONDON] Theresa May released the most contentious document of her two-year premiership on Thursday, vowing to push through her plan to keep the UK closely tied to the European Union single market after Brexit.

Despite the resignation of two pro-Brexit Cabinet ministers and a growing rebellion from within her own party, Mrs May published a 98-page "white paper" setting out in detail the deep trading partnership the UK wants with the EU.

At its heart is a proposal for a new UK-EU "free trade area," with interlinked customs regimes, and identical regulations for industrial goods and agri-food. While there would be "no tariffs on any goods," the UK's vast services sector will suffer significant disruption. Banks in particular will lose their current access to the EU market, as the government gives up on its earlier plan for both sides to recognize each other's regulations.

Mrs May faces a huge task trying to persuade EU negotiators to accept that the proposals are viable, while also keeping her Conservative party and Parliament on side. Time is running out to reach an exit agreement by the self-imposed October deadline, and Mrs May's plan has nothing new about the critical issue that's holding up progress: avoiding customs checks at the border with Ireland.

Even so, Mrs May appealed to European negotiators to "engage" with her blueprint in the same spirit of respect that she said her government was taking toward the EU's own principles and red lines.

"Our proposal is comprehensive. It is ambitious. And it strikes the balance we need - between rights and obligations," Mrs May wrote in the foreword to the white paper. "It would deliver a principled and practical Brexit that is in our national interest, and the UK's and the EU's mutual interest."

UK will mirror EU rules for goods, as well as collecting tariffs on behalf of the bloc. In a sign of the imbalance in the relationship, Mrs May isn't proposing the EU collect tariffs on behalf of the UK.

Britain proposes setting up new arrangements to allow it to have a voice - but not a vote - when EU introduces new regulations, and to facilitate the customs arrangement.

On rules of origin which govern whether goods are treated as EU-made, Britain is asking for no changes to current arrangements. This is crucial for manufacturers including car-makers, who otherwise face tariffs when exporting to the EU.

White paper sets out the parliamentary process after a deal has been agreed with the EU, and makes it clear that it will be conditional on support from lawmakers

BLOOMBERG