UK will leave single market, pharma highlighted as key industry

After months of keeping her Brexit plans secret, Prime Minister Theresa May says the UK will aim for a clean break from the European Union, and leave the single market.

The decision goes against many calls from business sectors for a ‘Soft Brexit’ in which the country could have retained direct access to the single market, but would also have preventing the UK regaining full control of immigration and trade deals.

Instead, May has decided to go for broke, aiming to exit the single market and then agree a free trade deal with the European Union.

While the deal is much riskier in economic terms than a Soft Brexit, the markets have responded positively to the clarity brought by the speech, with the pound rallying on the markets.

Delivering the long-awaited speech in London, May said a ‘half-in, half-out’ deal would not be good for Britain or the EU, despite calls for a ‘Soft Brexit’ deal which might have involved associate membership and access to the single market, similar to Norway.

“The United Kingdom is leaving the European Union. And my job is to get the right deal for Britain as we do,” she said.

Leaving the single market was crucial for May in order to reclaim complete control over immigration policy, and to reject the jurisdiction of the European Court of Justice – which she believed were central to 52% of voters supporting Brexit last June.

At the same time, May tried to strike a conciliatory tone, saying the UK would remain a good friend and neighbour to the European Union, and would aim for a mutually beneficial trade deal.

Leaving the single market would also allow the UK to strike its own trade deals with other countries, such as China, the US and India.

Nevertheless, May also acknowledged that some in Europe wanted to impose a ‘punitive’ Brexit deal on the UK.

Opponents of Brexit have frequently called the vote an act of ‘self-harm’, but in her speech May tried to recycle this term, saying any attempt by the EU to punish Britain would be “an act of calamitous self-harm for the countries of Europe.”

She warned that the UK would walk away from an deal that wasn’t fair, saying: “I am equally clear that no deal for Britain is better than a bad deal for Britain.”

However there were two surprises contained in the speech. First was the confirmation that the UK Parliament would be given the final say on any deal agreed between the UK government and the EU.

Secondly, May also said that the UK would seek to reach agreement allowing it to remain within the EU customs union.

This would allow it to avoid the huge complexity, cost and time of tariffs and border checks on goods between the EU and the UK. However she said existing custom union deals, such as that between the EU and Turkey, could not be applied to the UK.

Science and innovation

As with other sectors, the decision to leave the single market confirms a hugely complex un-tangling of regulation for the UK pharmaceutical industry, which relies on a network of European science, regulation and manufacturing.

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The decision to opt for a Hard Brexit is also the final nail in the coffin for the hope that the European Medicines Agency (EMA) could remain in London.  Other major EU cities will now step up their campaign to attract the agency, with Amsterdam joining the fray this week, alongside Stockholm, Dublin and Barcelona.

May said the UK would aim to be a world leader in science and innovation, and would continue to participate in European-wide science, research and technology initiatives. However the UK will not be contributing to EU funds, requiring it to develop special arrangements for these collaborations.

Avoiding the cliff edge

The Prime Minister said she would seek a ‘phased approach’ to Brexit, giving businesses time to prepare for the change.

She warned again that moves to impose trade barriers would harm the EU and the UK alike.

“Important sectors of the EU economy would also suffer,” May warned.

“We are a crucial – profitable – export market for Europe’s automotive industry, as well as sectors including energy, food and drink, chemicals, pharmaceuticals, and agriculture,” she said, and warned against punishing Britain just to “make a political point.”

The speech now sets up the UK government to trigger Article 50 by the end of March, after which time negotiation with the EU can begin.

UK pharma and biotech industry reaction

UK biotech association the BIA and pharma industry trade body the ABPI both welcomed the clarity the speech brought.

“I welcome the fact that delivering a leading role for science and innovation is one of the Prime Minister’s key guiding principles for the Brexit negotiation,” said the BIA’s chief exeutive Steve Bates.

“The increased certainty where possible from the speech is also useful for business planning. It’s good to see that the Prime Minister understands the need to “continue to collaborate with our European partners on major science, research and technology initiatives” and includes our sector as one that will remain in the forefront of collective endeavours to make better the world in which we live."

He warned that drug regulation will need “the closest attention to avoid a disruptive cliff edge for patients in both the UK and EU.”

He said the industry-government UK EU Life Science Steering committee which has already been set up would help assist in this process.

“Medicines Regulation is an area where Britain and the remaining Member states have adhered to the same rules for over 40 years so fits the Prime Minister’s criteria for being an area “where it makes no sense to start again from scratch” and may be a “specific European programme” in which the UK “might want to participate”.

Bates was also keen to stress the importance of an agreement on the free movement of people.

“Getting an early deal on the rights of EU citizens who are already living in Britain is a challenge I would encourage the Prime Minister to resolve as soon as possible.”

The ABPI’s chief executive Mike Thompson said the speech was a welcome statement of intent which provided the UK pharma industry with ‘confidence for the future.’

He added: "The ABPI is pleased that the Prime Minister has identified Britain becoming the best place for science and innovation as one of her twelve negotiation priorities. Our continued leadership in this area will be crucial in creating a truly ‘global Britain’."

Thompson said the ABPI would want to see the two year negotiation period also used to secure the UK’s "continued co-operation and alignment" with EU rules for the regulation of medicines, which he said would be in the best interests of UK patients.

"We look forward to continuing to work with Government to make a success of the UK leaving the EU, securing a deal that builds upon our status as a global pharmaceutical industry leader,” he concluded.