Latest briefings from Downing Street and the pro-Brexit camp firm up suspicions that EU exit will be hard rather than soft

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The big picture

Brexit will be hard rather than soft, and clean rather than messy. In other words, it’s goodbye to the single market and customs union, and hello to (at best) a short, defined “implementation phase”, but certainly not a drawn-out transition.

That, at least, was the gist of the briefings coming out of Downing Street and the pro-Brexit camp ahead of Theresa May’s big speech on Tuesday, in which she was due to lay out her Brexit plan before article 50 is triggered before the end of March.

Government warnings of a possible market reaction to the speech (sterling slipped to its lowest since October even before it was delivered) were seen as confirming the prime minister’s likely thrust, as were some uncharacteristically hardline comments from the chancellor.

Facebook Twitter Pinterest Philip Hammond. Photograph: Jane Barlow/PA

Philip Hammond, generally seen as a “soft” Brexiter, used an interview with Welt am Sonntag to issue what amounted to a veiled threat to the EU 27 that if Britain does not get a fair trade deal it may turn itself into a low-tax rival:

You can be sure we will do whatever we have to do. The British people are not going to lie down and say ‘too bad, we’ve been wounded’. We will change our model, and we will come back, and we will be competitively engaged.

Donald Trump’s subsequent words, in an interview with the Times, could have been designed to reinforce the message. Brexit, the president-elect said, would be “a great thing”, a trade deal between Britain and the US could be agreed “very quickly”, and the EU, like Nato, was pretty much dead in the water anyway. Happy days.

The view from Europe

In what some will see as heartening news, Michel Barnier, the European commission’s chief Brexit negotiator, said he wanted a “special” post-Brexit relationship with the City because of its importance to the EU as a financial centre, according to unpublished minutes of a meeting with MEPs:

Some very specific work has to be done in this area. There will be a special/specific relationship. There will need to be work outside of the negotiation box … in order to avoid financial instability.

Facebook Twitter Pinterest Michel Barnier. Photograph: Thierry Monasse/AP

He subsequently rowed back from what might have been the first hint of a chink in the EU’s Brexit armour, tweeting that what he had actually said was that the EU would need “special vigilance on financial stability risk”, not a special deal to access the City.

Whatever he did or did not say exactly, Barnier’s comments followed remarks in a similar vein by the Bank of England governor, Mark Carney, who told the Treasury select committee that the City was vital to Europe:

If you rely on a jurisdiction for three-quarters of your hedging activities, three-quarters of your foreign exchange activity, half your lending and half your securities transactions you should think very carefully about the transition.

In an intervention that could prove equally decisive for the final shape of Brexit, the Maltese prime minister, Joseph Muscat, confirmed that although it may be “quite obvious” that the City could be in line for a transition deal, EU law would continue to apply in Britain until the UK formally leaves.

It is not a transition period where British institutions take over, but it is a transition period where the European court of justice is still in charge of dishing out judgments and points of view.

Germany’s centre-left SPD party, meanwhile, said it would be prepared to prioritise “the unity of the EU” over the country’s short-term economic interests, while the Dutch deputy prime minister, Lodewijk Asscher, said the Netherlands would block any EU trade deal with the UK unless it signs up to tough tax avoidance regulations.

Meanwhile, back in Westminster

A much-touted tweak to Labour’s stance on immigration was due to be the centrepiece of a promised “relaunch” of leader Jeremy Corbyn, featuring the message that the party now accepts the need for more managed entry to the UK.

In the event, his words were rather drowned out by some slightly mixed comments he gave about the possible need for a maximum wage cap – and what he did eventually say about immigration was not wholly clear anyway.

Labour was “not wedded to freedom of movement for EU citizens [into the UK] as a point of principle”, Corbyn said, before adding helpfully: “I don’t want that to be misinterpreted; nor do we rule it out.”

Tristram Hunt, another backbencher, announced his departure, leading to a potentially tricky byelection in his Stoke on Trent seat.

But away from internal politics, the cross-party select committee on Brexit, chaired by Labour’s Hilary Benn, said the government must seek a transitional arrangement to avoid a “cliff edge” Brexit, and offer parliament a vote on the final deal:

We’re not asking the government to give away its red lines or negotiating fall-back positions, but we do want clarity on its broad aims given the significance and complexity of the negotiating task.

You should also know:

Read these

In the Guardian, Matthew d’Ancona argues that “Brexit is the easy bit”, pointing out that once Britain is out, the relationship with the EU that follows – not just trade but in areas like patent protection and policing – could take years to define. There’s a model for how May will tackle the task, he suggests:

Those who know May well suggest that a precedent is under our very noses. As home secretary she opted out of 130 EU crime and policing measures – before opting back in to 35, including the European arrest warrant. This, broadly, is the model she will try to follow.

Dominic Cummings’ blogpost on how Vote Leave won the referendum (see above) is very long but enthralling if you’re into that kind of thing, full of juicy anecdotes but above all an object lesson in successful campaigning:

I found 10-15 highly motivated people who knew what they were doing and largely left them to get on with it while stopping people who did not know what they were doing interfering with them. We worked out a psychologically compelling, simple story, and we applied some simple management principles. It is hard to overstate the relative importance in campaigns of message over resources.

In the FT (paywall), Janan Ganesh provides the most eloquent exposition yet of the argument that far from being vague, vacillating and indecisive, May knows exactly what she wants and has said so all along – it’s just that a lot of people didn’t want to hear it:

It is possible to predict, in rough terms, not just the exit deal she will sign but the Britain she will try to craft afterwards. Her commitment to the slower, more familiar nation of her youth, even at the cost of economic dynamism, is clear enough to anyone with the ears to pick it up and the stomach to accept it … For the first time in my life, Britain has a prime minister who would forgo some economic growth for some social order.

Tweet of the week

David Allen Green: a man who does not mince his words …