Theresa May gets Cabinet backing to strike 'ambitious' bespoke Brexit deal

"The transition period is useful and will enable the public administration in Britain to prepare themselves for the kind of challenges they will have to face", Barnier said at a press conference in Brussels while presenting the EU's formal position on the transition.

The decision is a compromise with Conservative lawmakers who last week rebelled in parliament and inflicted an embarrassing defeat on May during a debate on the legislation which will end Britain's European Union membership.

Unveiling the European Union executive branch's new negotiating guidelines, chief negotiator Michel Barnier said that during the transition period Britain would remain part of the bloc's single market, which includes freedom of immigration for European Union nationals.

This would coincide with the end of the EU's seven-year budget for 2014 to 2020, he said, avoiding potentially thorny negotiations on how much Britain should pay for the extra few months in 2021 that would be necessary under May's proposal.

Over a hundred banks in London, which are branches of lenders headquartered elsewhere in the European Union, operate under European Union "passporting" rules and are uncertain whether they can still do business in Britain after it exits the bloc in March 2019.

Earlier on Wednesday Christine Lagarde, the head of the International Monetary Fund, said that it was imperative that the United Kingdom secure a good deal for the City in order to minimise the economic impact of Brexit.

Rulings of the European Court of Justice will continue to apply, the EU said.

Bank of England
The Bank of England is expected to confirm that existing rules will apply to EU banks after Brexit

He also revealed the Bank's plans are based on agreement being struck on a transition period by the end of the March next year.

Mrs May told the Cabinet she was seeking "a significantly more ambitious deal than the EU's agreement with Canada", her spokesman said.

But they are still unclear on what Britain wants from the future relationship, including the shape of any trade deal.

"We have accepted the amendment. but I can assure.(members of parliament) that we would only use this power in exceptional circumstances, for the shortest possible time", May said.

Ms Lagarde indicated she expects the EU's negotiators to do more to reach a deal, as well as the UK's team in Brussels.

Influential pro-Brexit lawmaker Jacob Rees-Mogg criticised these conditions as "rather hostile", leaving the United Kingdom "no more than a vassal state, a colony, a serf of the European Union".

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  • Adam Floyd