The 10 Brexit compromises Theresa May won't talk about

Neither Theresa May nor Jeremy Corbyn said much about the substance of the Brexit negotiations during the election campaign. Since May’s failure to secure an overall majority, both main parties have started to consider the merits of a “softer” Brexit – one that would enable Britain to retain more economic ties with the EU than May initially planned. But neither seems willing to admit that withdrawing from the EU is going to involve painful trade-offs. As the talks open this week, here are 10 of the most difficult questions that the British government will have to answer.

1. Will the UK pay its bill to get a free trade deal?
How can the UK get round the EU’s hard line on what negotiators call “sequencing”, namely that talks on an eventual free trade agreement between the EU and the UK cannot start until the legal separation, the consequence of Britain triggering article 50, has been sorted out? For the other 27 states, this means an accord on the rights of EU citizens in the UK and on the principles of how much money the UK should pay. The EU reckons it is “owed” €55-75bn (£48-66bn), much of it Britain’s share of unspent budgetary commitments. Is May willing to compromise on money so talks can move on to trade, even though the Tory right will kick up a fuss if she agrees to pay even a fraction of the sum demanded?

2. Will May agree to a transitional deal?
Britain will leave the EU in March 2019 but the future relationship, including a trade agreement, will take many years to negotiate. Hence the need for interim arrangements, allowing goods, services, capital and data to continue to flow, until the new EU-UK trade deal takes effect. In any case, Britain will take several years to build the infrastructure for its new customs and immigration controls. The EU says that, if the transition involves staying in parts of the single market and customs union, Britain must also accept free movement of workers, budgetary contributions and the jurisdiction of the European court of justice (ECJ) for the interim period. Will May agree to that, and if so, for how long?

3. Will the European court of justice have any role in the deal?
Refusing a role for the ECJ is one of May’s red lines. The EU is adamant that, if any part of Britain’s future relationship resembles being in the single market, the Luxembourg-based court must be able to intervene. So if the UK stays in the single market for aviation (as airlines operating out of Britain hope), will it accept ECJ rulings, as do Norway and Iceland, which are in the aviation market although not part of the EU? The same dilemma applies to many other areas, such as financial services, electricity and security co-operation.

4. Will the UK have to leave the EU’s regulatory bodies?
The Confederation of British Industry has identified 34 regulatory agencies covering agriculture, energy, transport and communications. Britain will have to either stay in these or create bodies of its own. The European Aviation Safety Agency, for example, authorises British aircraft to fly. The European Medicines Agency advises the European commission on which drugs should be licensed for sale across the EU. Euratom regulates the trade of nuclear materials. The European commission’s competition directorate approves mergers and state aid.

5. What will it cost Britain to safeguard the City of London?
May has never indicated that she will fight for a special deal for financial services – yet they provide about £70bn of tax revenues a year to the Treasury. The City accepts that it will lose the benefits of single market membership but hopes for a deal on “equivalence” whereby the UK and the EU would recognise each other’s rules and consult each other on new ones. The EU thinks that would be far too generous to the UK. The UK might have to pay a high price in terms of ECJ intrusion for a deal that suits the City.

6. Will Britain restrict EU immigration?
If May pushes for a deal that cuts the numbers significantly, it may satisfy hardliners but harm the economy and public finances. EU migrants are comparatively well educated, young and likely to work. Has the government analysed the economic costs of the various options on EU migration? Will it offer EU citizens a preferential regime, to gain some goodwill from the 27?

7. How will the borders actually work?
Assuming that the UK presses ahead with plans to leave the customs union, how can it deal with the fallout? Physical checks at borders – for tariffs, rules of origin and safety standards – will require a massive investment in infrastructure and IT systems. Delays are likely to inconvenience not only manufacturers, but also retailers and farmers. Can clever technology reduce the paperwork? And though few people want to see a new hard border separating Northern Ireland and the Irish Republic, nobody has yet worked out an alternative. Will the re-emergence of border posts provoke terrorists and destabilise the peace process?

8. Will Britain accept EU rules on police co-operation?
Is the UK willing to cede sovereignty to remain in the EU’s criminal databases, Europol, Eurojust and the European arrest warrant? The Manchester and London Bridge terror attacks highlighted the importance of cooperation on policing and security. But staying in those institutions will mean accepting EU rules on data privacy, a role for the ECJ and no vote on decisions.

9. Does the UK want to be associated with EU foreign policy?
Does May want the UK to associate itself with the EU on foreign and defence policy? If yes, will the British seek institutional ties that enable them to feed in views before decisions are taken? Or would the UK prefer to act as a solitary diplomatic player, or as a junior partner to the US?

10. Is there a plan B?
If the talks break down and there is no deal, does May have a real plan B? Would she counteract the likely recession with a fiscal stimulus? Would she push for a plethora of trade deals with countries outside Europe, though they would take years to negotiate? Or would she prefer unilateral free trade, which would provide a bigger and swifter boost to output – even though scrapping tariffs would hurt many manufacturers and farmers? That ultra-liberal approach would sit uncomfortably with her promises to help “just-about-managing” families and to design a more active industrial policy.

The prime minister may well believe that crashing out of the EU without a deal would be disastrous for Britain. In that case, she should explain why, rather than repeat the mantra that no deal is better than a bad one. She has done extraordinarily little to educate either her party or the public about the painful compromises that any deal will require.

Charles Grant is director and John Springford is director of research at the Centre for European Reform.