Theresa May warns she will reject Brexit transition if UK has failed to strike long-term EU trade deal

Theresa May has warned she will reject a transition to cushion Brexit if she has failed to also strike a long-term trade agreement with the EU – raising the chances of a “no deal” exit.

The Prime Minister said Britain must know “where you are heading” before agreeing the two-year transition she has proposed, to try to break the deadlock in the talks.

The stance echoes a statement, last week, by the Brexit Secretary David Davis, which was immediately attacked as “extraordinarily dangerous” by a pro-EU group.

It is widely agreed, both at home and in Brussels, that there is no time to agree permanent trading terms, given the need to reach a deal by next autumn.

Last week, Mr Davis told MPs the Government would not sign up to what one Conservative MP called a “permanent bridge to nowhere” – with no end state agreed.

“Such a transition phase would only be triggered once we have completed the deal itself,” he said.

Asked, by The Independent, if that was agreed government policy, the Prime Minister’s spokesman replied: “Yes.”

“Everyone has always been clear that we are looking to wrap all this up in one single go. Everything will be agreed at the same time,” he added.

“As the Prime Minister has set out, it’s a bridge to where you are heading. You need to know where you are heading.”

Cabinet divisions over what sort of long-term trading arrangements Britain should seek have made a transition the only likely way to avoid “crashing out” of the EU.

Indeed, no proper discussion has taken place – because one group of ministers is demanding a clean break, while the other seeks to remain as close to the EU as possible.

In her Florence speech, Ms May suggested the transition would be used to put into place agreed arrangements, but avoided setting down firm conditions.

She has now been forced to abandon that deliberate ambiguity, after her Brexit Secretary sought to reassure Brexiteer Tories in the Commons last week.

He said Rishi Sunak, a backbencher, was “right” that a transition would only be accepted “if the final relationship with our European allies has been agreed, at least in principle”.

“We cannot carry on negotiating through that. Our negotiating position during the transition phase would not be very strong,” Mr Davis added.

The No 10 spokesman argued both sides were now keen to agree future trading arrangements “as soon as possible”, after the EU said it would start internal preparatory work.

However, asked if a decision to seek a transition “in principle” would be made by the end of December, the spokesman replied: “I’m not going to get ahead of myself.”

The further hurdle thrown in the way of a transition will alarm business leaders, who have joined forces to warn jobs and investment will be lost if there is further delay.

In a draft letter to the Brexit Secretary, five business groups said time was running out before firms start implementing contingency plans for a no-deal departure.