Theresa May has set out detailed plans for the first time on how Britain would try to keep trade flowing if it fell out of the EU without a deal, as the prime minister prepared for a high-stakes game of brinkmanship with Brussels.
She told MPs that her conciliatory speech in Florence last month had introduced “a new dynamic” into Brexit talks, but added that the government had a duty to prepare for them failing.
“While I believe it is profoundly in all our interests for the negotiations to succeed, it is also our responsibility as a government to prepare for every eventuality,” she said.
Mrs May’s House of Commons statement marked a twin-tracked approach. On the one hand she explicitly accepted Brussels’ conditions by confirming Britain would accept European Court jurisdiction and new EU rules during a transition period.
The move will be seen in Brussels as a welcome outbreak of realism in London, but it crosses Brexit “red lines” set out by foreign secretary Boris Johnson and angered some Conservative Eurosceptics.
On the other hand Mrs May stepped up preparations for the possibility that Britain ends up leaving the EU in March 2019 without a trade deal and facing a regulatory vacuum, a risk addressed in a customs white paper.
The customs paper sets out a contingency plan in which traders would need to present goods for inspection “as inland as possible” because of space constraints at the majority of ports.
It added that the UK could also manage a “no deal” scenario by introducing measures to replace border checks, such as businesses “pre-notifying” or “self-assessing” imports.
“The UK will seek to negotiate continued membership of the safety and security zone,” the paper said. “However, in a contingency scenario where the UK does not have membership, the carrier would be required to lodge a pre-arrival safety and security declaration for imports and exports.”
Mrs May is being urged by Tory Eurosceptics to step up planning for a “no deal” outcome to give credibility to her longstanding threat that she could walk away from the negotiating table if she was faced with a bad deal.
But British officials admit contingency planning is at an early stage and that the government has not started spending the large sums of money on staff, IT systems and real estate needed to build a new customs and regulatory system by March 2019.
Mrs May struck a generally upbeat tone, insisting that her Florence speech had been welcomed across Europe. “The ball is in their court,” she said. The European Commission countered that “the ball is entirely in the UK’s court”.
France and Germany have signalled they do not yet want to see Brexit talks move on to a second phase considering the future UK-EU relationship, in an attempt to pressurise Mrs May into increasing her opening €20bn offer for an “exit bill”.
Downing Street expects some progress to be made at the European Council meeting in Brussels in October 19-20, but not enough. “There’s going to have to be a big crisis in November,” said one senior British official.
Some rightwing Conservative Eurosceptics are sanguine about Britain leaving the EU without a deal, since it would mark a decisive break from the bloc’s regulatory system and force Britain to change its economic model to compete globally.
But it would require the creation of a new British bureaucracy to replace EU regulatory bodies and a vastly increased customs service and is seen in some European capitals as an empty threat.
“Far from having more for public services, Brexit Britain will have to spend tens of billions it doesn’t have on new quangos — brilliant,” tweeted James Chapman, former chief of staff to Brexit secretary David Davis.
Mrs May insists the Florence speech can unlock the talks and she repeated her plan to create a smooth exit via a transition period of “around two years” during which Britain and the EU would continue to trade with each other “on current terms”.