The UK could continue to be subject to existing EU rules and regulations until 2021 under the terms of an implementation period lasting two years after the date of Brexit proposed by Prime Minister Theresa May.
In a landmark Brexit speech, Mrs May also pledged that other EU nations would not be left out of pocket by Britain’s decision to pull out, paving the way for an estimated payment of around £18 billion (about 20 billion euro) into Brussels budgets up to 2020.
Mrs May put no figure on the amount the UK will pay in its so-called “divorce bill” and stuck to her position that the final total cannot be agreed until the future trade relationship is settled.
But she insisted that estimates of Britain’s liabilities, which have ranged from £50-£80 billion, were “exaggerated and unhelpful”.
The address in the Italian city of Florence was described as “constructive” by the EU’s chief Brexit negotiator Michel Barnier.
But he insisted that Mrs May’s comments “must now be translated into a precise negotiating position” in order to make meaningful progress in talks which reopen in Brussels on Monday.
Mr Barnier stressed that any transition period must be subject to existing EU rules, which include free movement of people.
And he said he wanted to discuss the “concrete implications” of Mrs May’s promises on money, which he cautioned may not cover all the UK’s liabilities.
In possibly her most important speech yet on Brexit, Mrs May called on fellow European leaders to show “creativity and flexibility” in forging a unique partnership, which would include a “comprehensive and ambitious” trade deal and a new treaty guaranteeing future co-operation on security, law enforcement and criminal justice.
Mrs May said the UK accepted that “we can’t leave the EU and have everything stay the same” and repeated her position that Britain will not seek continued membership of the European single market or customs union.
Accepting that neither the Government nor the EU will be ready to fully implement Brexit on March 29 2019, the PM proposed an implementation period, probably of two years, during which “the existing structure of EU rules and regulations” would apply and the UK would remain in the single market.
New migrants during that period would be required to register with authorities.
In an attempt to break the deadlock over the UK’s financial settlement, Mrs May promised the UK would honour its commitments under the existing budget period, which lasts until 2020, and continue to participate in some other programmes on areas including science, education and culture beyond Brexit.
“I do not want our partners to fear that they will need to pay more or receive less over the remainder of the current budget plan as a result of our decision to leave,” she said.
“The UK will honour commitments we have made during the period of our membership.”
Her proposed treaty on security would be “unprecedented in its breadth, taking in co-operation on diplomacy, defence and security, and development.
“And it will be unprecedented in its depth, in terms of the degree of engagement that we would aim to deliver,” she said.
Mrs May rejected the models for the future UK-EU relationship offered by Norway’s membership of the European Economic Area or Canada’s free trade deal on goods, which came into effect on Thursday.
Instead, she called for “a creative solution to a new economic relationship that can support prosperity for all our peoples”.
She assured EU nationals living in the UK that she wanted them to be able to “carry on living your lives as before”, and said protections for them would be written into UK law.
In a significant concession, she said that UK courts would be able to “take into account” rulings of the European Court of Justice on EU law following Brexit.
And she said a new judicial mechanism would have to be developed to resolve disputes over the implementation of the withdrawal agreement, as it would not be appropriate for either the European Court of Justice or the UK courts to be the final arbiter.
Mrs May dismissed suggestions that Brexit would undermine environmental, workplace and safety safeguards offered by EU regulation.
She said there would be no need for new tariffs on trade between the UK and EU and promised that any future UK divergence from EU rules would not be designed to gain an “unfair competitive advantage”.
“The eyes of the world are on us,” said Mrs May.
“But if we can be imaginative and creative about the way we establish this new relationship, if we can proceed on the basis of trust in each other, I believe we can be optimistic about the future we can build for the United Kingdom and for the European Union.”
Mrs May’s 35-minute address was hailed as “positive, optimistic and dynamic” by Foreign Secretary Boris Johnson, who was present in the audience just six days after publishing a 4,000-word personal Brexit manifesto which exposed Cabinet rifts over the future relationship with Europe.
Mr Johnson said the Prime Minister had “rightly” disposed of the Norway option, which would have seen Britain continuing to make payments into EU budgets and accept free movement of people in return for access to the single market and customs union.
But he accepted that the UK would have to wait to take back powers from Brussels, telling reporters: “As the Prime Minister rightly said, we are going to have a transition period and after that of course we are going to be taking back control of our borders, of our laws, of our destiny.”
The leader of the centre-right EPP grouping in the European Parliament, Manfred Weber, a German MEP and close ally of chancellor Angela Merkel, said: “In substance, PM May is bringing no more clarity to London’s positions.”
“I am even more concerned now.”
And Labour leader Jeremy Corbyn said Mrs May’s speech “appeared to be the product of negotiations within the Tory Party rather than negotiations with the EU”.
Enthusiasts for hard Brexit were scathing about the PM’s stance, with former Ukip leader Nigel Farage saying it would mean the UK leaving the EU “in name only”.