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Final Brexit deal must allow Britain to set its own rules and strike ambitious trade deals says May

British home secretary Amber Rudd PICTURE: Victoria Jones/PA

The final Brexit deal must allow Britain to set its own rules and strike "ambitious" trade deals with countries around the world while having the "best possible" access to EU markets, Theresa May has told her cabinet.

As the full cabinet came together to discuss for the first time the UK's preferred "end state" for its future relationship with the EU, the British prime minister insisted she was confident of achieving a result which will lead to a dynamic post-Brexit economy delivering growth, jobs and prosperity.

Her official spokesman said Mrs May's message was backed by the whole cabinet at the meeting in 10 Downing Street, though no formal position is expected to be agreed for some time, with further discussions scheduled for the new year.

In the 105-minute meeting, the cabinet did not discuss the position set out so far by the European Commission's chief negotiator, Michel Barnier, whose vision of a free trade agreement similar to that struck with Canada in 2016 differs sharply from Mrs May's demand for a bespoke UK deal delivering a "deep and special partnership".

In comments to a number of European newspapers, including the Guardian, Mr Barnier said there would be no special arrangement to allow City firms to trade freely in the EU if Britain leaves the single market.

"There is no place [for financial services]," he said.

"There is not a single trade agreement that is open to financial services. It doesn't exist."

Describing the position as a result of "the red lines that the British have chosen themselves", he said: "In leaving the single market, they lose the financial services passport."

Mrs May's spokesman said the prime minister told cabinet that she was seeking "a significantly more ambitious deal than the EU's agreement with Canada".

And she ruled out the option of a Norway-style membership of the European Economic Area as "democratically unsustainable" because it would mean the UK having automatically to observe rules and regulations which it had no influence over.

Mrs May's spokesman said she told ministers that the starting point for discussing the UK's preferred end state was her own speeches at Lancaster House and in Florence earlier this year, in which she ruled out membership of the single market and customs union, but voiced her hope for a new "deep and special partnership" spanning the economic and security relationship with the EU.

She told cabinet it was clear that the government was seeking "a deal which secures the best possible trading terms with the EU, enables the UK to set rules which are right for our situation and facilitates ambitious third-country trade deals", the spokesman said.

Britain would need to be "creative" in designing proposals for a future economic partnership, Mrs May said.

And she said the positions adopted by the government would be in the national interest, adding that she was "confident of building a dynamic post-Brexit economy which will deliver growth, jobs, prosperity and a better future".

The spokesman said Mrs May stressed that the kind of deal she was looking for would be in the interests both of the UK and the remaining EU.

There was agreement on her approach from the ministers attending cabinet, about 25 of whom spoke during the "very detailed" discussion, he said.

"The cabinet was unified behind the Lancaster House and Florence speeches and behind the deal which she agreed on Friday," said the spokesman.

His comments followed reports of a growing difference over the level of regulatory alignment with the EU which Britain should maintain after Brexit, with Philip Hammond and Amber Rudd understood to favour closer ties with the bloc than convinced Brexiters like Boris Johnson and Michael Gove, who want freedom to ditch red tape in order to facilitate trade deals elsewhere in the world.

Asked about Mr Barnier's comments, the spokesman said it was to be expected that the commission would set out its position at the start of the second phase of Brexit negotiations.

In comments likely to infuriate hardline Brexiters, Mr Barnier said the UK must follow all EU rules during the expected two-year transition period following the official date of Brexit in March 2019 – including laws introduced during that time with no British input into decisions.

And he insisted the UK must accept the "complete architecture" of the EU – including the role of the European Court of Justice, free movement of people and the Commons Fisheries Policy – during transition, saying: "It will be essentially the economic status quo."

While Britain can negotiate trade deals with other countries during the transition, he said they cannot enter into force until the period is over, probably in 2021.

He believed that a UK/EU free trade deal could be agreed within the two-year transition, but said it would have to be ratified by more than 35 national and regional parliaments across the EU27, each of which holds a veto.

Mr Barnier made clear that the EU will respond firmly to any deviation from the framework of single market regulations which might give the UK a competitive advantage through lower taxes or weaker standards.

"We will not accept from the other side, regulatory competition against social rights, against environmental rights, against consumer rights and against fiscal regulations... or against financial stability," he said.

And in reference to US pressure on the UK to ditch EU food standards in the hope of securing a free trade deal, he said: "We will not accept chlorinated chickens, nor other products that do not meet our food standards."

Defence Secretary Gavin Williamson, when pressed by the Evening Standard over Mr Barnier's suggestion there cannot be financial services included in a trade deal, said that "Michel Barnier says lots of things".

"He is a negotiator... any deal we do with the European Union is going to be a bespoke deal, I am quite sure that actually we can deliver the services part of the package that is so vital for the City of London," Mr Williamson added.

Pressed on whether it can be part of a trade deal, Mr Williamson said he cannot see why it cannot be.

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