EU Parliament vows UK won't get free trade deal in the next two years – hours after Philip Hammond declares optimism

Any transition deal, to cushion the economic blow from Brexit, can only run for three years and must be 'limited in scope', MEPs will say

A Union flag flies outside the European Parliament in Brussels (Reuters)

The European Parliament has vowed that Britain will not be given a free trade deal by the EU in the next two years – just hours after Philip Hammond insisted he was “very optimistic”.

MEPs also insisted that if Theresa May seeks a transition deal, to cushion the economic blow from Brexit, it can only run for three years and must be “limited in scope”.

There will be no special deal for the City of London giving “preferential access to the single market and, or, the customs union”, the Parliament will also stipulate.

And it will not allow Britain to use its military muscle or intelligence connections as a “trade-off” to try to secure a more advantageous trading agreement.

The Parliament’s hardline stance emerged even before the UK’s ‘man in Brussels’ delivered the historic letter triggering the Article 50 exit clause, at around 12.30pm today.

Crucially, MEPs can veto any eventual deal between the EU and the UK – and Guy Verhofstadt, the European Parliament's chief negotiator, has already threatened to exercise that right, if necessary.

This morning, the Chancellor said: “I’m absolutely confident that we will negotiate a deal with the European Union and I don’t think anybody has any doubt about that.”

But the European Parliament resolution, its first official response to the triggering of Article 50, says this “can only be concluded once the United Kingdom has withdrawn from the EU”.

A transitional deal to run after 2019 is possible, to ensure that damaging custom controls and barriers on trade do not have to come into force on the day after Brexit is completed.

However, a copy of the resolution, leaked to The Guardian, insists these arrangements should not exceed three years and will be “limited in scope, as they can never be a substitute for union membership”.

A further red rag for hardline Brexit-backers is that “the European Court of Justice will be responsible for settling any legal challenges during the transition period”.

The resolution, which will be voted on next Wednesday in Strasbourg, calls for the EU’s remaining 27 member states to “act in unity in the defence of the European union’s interests and its integrity”.

And it suggests the model for the future could be a form of associate membership, currently enjoyed by Ukraine – offering substantial market access, but probably requiring a substantial payment to the EU budget.

However, Ukraine is not subservient to EU law or to rulings by the European Court of Justice, nor must it allow the free movement of EU citizens.

As The Independent reported yesterday, the Parliament will also insist that EU nationals arriving in the UK up to March 29, 2019 must be given the same rights to stay and work after Brexit.

However, Mr Hammond appeared to concede ground on that controversy today, saying “We remain full members of the European Union for the next two years, subject to all the rules and obligations of membership.”

And he slapped down Boris Johnson’s claim that it would be “perfectly okay” for Britain to crash out of the EU with the “no deal” threatened by Theresa May.