Brexit: Theresa May unveils plans for Britain to stay in single market five years after it voted Leave

Theresa May today conceded that Britain would have to accept EU free movement and stay in the single market for at least two years after Brexit to stop businesses facing a cliff-edge departure from the union.

In a major speech in Florence, the Prime Minister committed to a full-blooded transition period after Article 50 negotiations finish in March 2019 – rejecting counsel from hard Brexiteers who want an immediate clean break.

In a victory for less Eurosceptic figures in her Cabinet such as Chancellor Philip Hammond, Ms May said free movement would continue under EU rules for the duration of the period – though immigrants would have to sign up to a new Belgian-style migration register, which is permitted by existing EU rules.

The PM reiterated her intention to secure a bespoke long-term deal for the UK, rejecting a claim by EU chief negotiator Michel Barnier that Britain would have to choose between a looser Canada-style negotiation agreement or tightly integrated Norway-style deal.

Speaking at the Santa Maria Novella complex in central Florence – a sometime church and police barracks whose environs were recently renovated with EU development funds – Ms May said that a “a period of implementation would be in our mutual interest”.

She told her 150-strong audience, composed of the British press pack, Italian business figures and a small number of local and British dignitaries, that staying in the single market temporarily would be the best way to guarantee “smooth and orderly” transition. A two-year transition would mean free movement and single market access continuing for five years after the 2016 Brexit referendum.

“Clearly people, businesses and public services should only have to plan for one set of changes in the relationship between the UK and the EU,” she said.

“So during the implementation period access to one another’s markets should continue on current terms and Britain also should continue to take part in existing security measures. And I know businesses, in particular, would welcome the certainty this would provide.

“The framework for this strictly time-limited period, which can be agreed under Article 50, would be the existing structure of EU rules and regulations."

Ms May also left the door open to a transition longer than two years by saying the period should be "determined simply by how long it will take to prepare" processes and systems that will underpin a future partnership.

She added: “For example, it will take time to put in place the new immigration system required to re-take control of the UK’s borders. So during the implementation period, people will continue to be able to come and live and work in the UK; but there will be a registration system – an essential preparation for the new regime.

“As of today, these considerations point to an implementation period of around two years.”

The change – or clarification – of position, brings the Government effectively in line with Labour’s view that the UK should stay in the single market for a transition period, something noted by party leader Jeremy Corbyn

He said: “Fifteen months after the EU referendum the Government is still no clearer about what our long-term relationship with the EU will look like.

“The only advance seems to be that the Prime Minister has listened to Labour and faced up to the reality that Britain needs a transition on the same basic terms to provide stability for businesses and workers."

Rejecting the dichotomy between a Canadian-style or Norwegian style deal, Ms May said she didn’t “believe either of these options would be best for the UK or best for the European Union”.

EEA membership would mean the UK adopting rules that the UK had no say in making, she said, while a loose Canadian free trade deal would “represent such a restriction on our mutual market access that it would benefit neither of our economies”, she said.

The PM went on to effectively accuse the European Commission of adopting a “false premise” by claiming that no bespoke deal could be made that gave Britain the benefits of both approaches.

Representatives from the European Commission were notably absent from the Prime Minister’s audience – with officials apparently watching the address on television back in Brussels.

However, chief negotiator Michel Barnier welcomed the speech as having “expressed a constructive spirit” – and said Ms May’s “request” to remain in the single market would “be taken into account by the EU and examined” in light of his negotiating mandate from the other member states.

But he reiterated his warning that the UK would have to make “sufficient progress” on separation issues for EU citizens, the Northern Ireland border and the divorce bill – where the commission says concrete progress has been slow.

“We look forward to the United Kingdom's negotiators explaining the concrete implications of Prime Minister Theresa May's speech,” he said.

“Our ambition is to find a rapid agreement on the conditions of the United Kingdom's orderly withdrawal, as well as on a possible transition period.”

The speech is likely to do little in the short term to break the deadlock in talks, with Brussels officials now seeing it as increasingly unlikely that the UK will meet the condition of “sufficient progress” to start trade talks at a European Council meeting scheduled for October.

Brexit Secretary David Davis will return to Brussels on Monday to resume meetings with EU officials, which were postponed from this week in order to allow Ms May to make her case in today’s intervention.