What is a 'transitional' Brexit deal and what would it involve?

Theresa May has signalled she will not let UK simply crash out of EU in 2019 without some sort of parachute for business

Theresa May addresses delegates at the annual Confederation of British Industry conference in central London.

Theresa May addresses delegates at the annual Confederation of British Industry conference in central London.
Photograph: Justin Tallis/AFP/Getty Images

What is a ‘transitional’ Brexit deal?

Theresa May has spoken about the need to have some transitional trading arrangements post-Brexit. That is significant because it amounts to the strongest hint yet that the government will not let the UK simply crash out of the EU in early 2019 without business having the protection of some sort of parachute.

The demand for a transitional deal has arisen because there is a severe mismatch between the two timetables that will apply when the government negotiates Brexit. Triggering article 50, which May has promised to do before the end of March next year, will lead to the UK leaving the EU after two years. But if the UK wants a free trade deal with the EU, as seems likely, negotiating that within two years is almost certain to prove impossible. Most experts believe this would easily take five years, or more.

Theresa May hints at transitional Brexit deal to avoid ‘cliff edge’

What would happen if there wasn’t a transitional trade deal in place when the UK leaves the EU?

The UK would default to trading with the EU on World Trade Organisation terms and companies that trade with the EU would lose all preferential access. That is why the Confederation of British Industry and others are so keen on a transitional deal to cushion the impact of Brexit.

What would a transitional deal involve?

That would be a matter for negotiation, but the assumption in the business community is that it would be an arrangement that preserved single market membership, akin to Britain remaining in the European Economic Area. Or the Norway option, as it was called during the EU referendum campaign.

This would allow businesses to carry on trading with the EU much as they do now, but it would also require the UK to pay into the EU budget and British firms to comply with EU regulations. It is quite possible that this could last for five years, meaning that the UK would not achieve full Brexit until perhaps 2024.

Is everybody going to like that?

For businesses, that would be a relief. But for hardline Brexiters who want to leave the EU quickly, this would look like a betrayal.

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