After a Week of Turmoil, British Government Publishes Its Plan for Brexit

LONDON—The British government published in detail the long-awaited plan for its future economic relationship with the European Union, including proposals that have disappointed the financial-services industry because they accept a significant reduction in the sector's access to Europe.

The contents of the 98-page document have already torpedoed a fragile truce between warring factions in Prime Minister Theresa May’s ruling Conservatives over how close the U.K.’s economic ties to the EU should be after the country’s departure from the bloc in March 2019. Two cabinet ministers resigned this week when details of the plan were finalized.

The government hopes the proposal will inject fresh momentum into Brexit talks with less than nine months to go until Britain’s planned withdrawal. Yet Mrs. May now faces the twin challenges of steering her plan through Parliament and persuading a skeptical EU to sign up to it before the time for negotiations runs out.

The so-called white paper, published Thursday, proposes an ambitious free-trade area between the U.K. and the EU after Brexit. It suggests new institutional arrangements to oversee the new partnership and resolve disputes, citing international precedents such as the North American Free Trade Agreement and the EU’s own association agreement with Ukraine.

The paper effectively commits the U.K. to mirroring EU product regulations in to preserve cross-border trade in goods, while seeking a freer hand on services—a move that London acknowledged will inevitably mean less business for U.K.-based financial firms from EU customers.

Preserving unfettered access to the EU market for financial services was once a central goal of the U.K.’s Brexit strategy. But the government said Thursday it would instead seek only to negotiate a framework enshrined in international law for the close cooperation between U.K. and EU financial regulators, while preserving British autonomy on financial-sector rules. It acknowledged such an approach “means that the U.K. and the EU will not have current levels to access to each other’s markets.”

The proposal crystallizes concerns in the financial sector that Brussels and London weren’t likely to reach an agreement that broadly preserved the status quo. Already some banks have begun moving key staff to EU capitals ahead of Britain’s withdrawal. ContinueReading