Sign up here to receive the daily news briefing in your inbox every morning with exclusive insight from the BrexitCentral team Theresa May insists UK will leave Customs Union and negotiate free-trade deal with EU… Speaking to Sky News Political Editor Faisal Islam, she said: “We are leaving the Customs Union. Then we are going to negotiate a free-trade agreement with the EU. It’ll be a separate agreement we can negotiate,” the PM added… Her comments will be seen as an attempt to assuage fears of those Tory MPs who fear a ‘soft’ Brexit and as a rebuke to colleagues such as Chancellor Philip Hammond, who last week suggested the UK-EU economic relationship would change only “very modestly”. Speaking during her trade trip to China, Mrs May dismissed a report which suggested the UK economy would be hit whatever exit deal is negotiated with the EU. “The analysis has not been completed and it is not like the agreement we want to negotiate. We want to trade with as little friction and tariffs as possible,” she said. – Sky News By embracing China, we can enjoy a golden age of trade post-Brexit – Emma McClarkin MEP for the Telegraph (£) Tories must stop their infighting and get behind PM to make the best of Brexit – The Sun says …as Liam Fox rules out UK being part of any customs union with EU after Brexit… The international trade secretary said Britain could only “take control” by seeking trade deals across the world which are impossible within EU arrangements. The prime minister has committed to leaving the customs union but nerves are growing among Conservative Brexiteers that the government, and especially the Treasury, are pushing for a deal that effectively replicates its rules in key areas. This would limit the government’s ability to sign trade agreements with new global partners. Dr Fox, who is responsible for laying the groundwork for those deals, told Bloomberg TV: “It’s very difficult to see how being in a customs union is compatible with having an independent trade policy because we would therefore be dependent on what the EU negotiated in terms of its trading policies and we’d be following behind that. We have to be outside of that to take advantage of those growing markets. One of the reasons we are leaving the EU is to take control and that’s not possible with a common external tariff.” – The Times (£) Liam Fox: No customs union with EU after Brexit – Politico Liam Fox rules out UK staying in any form of customs union with EU after Brexit – Telegraph …after reports emerge that senior Brexit officials are considering customs union deal after Brexit Theresa May’s Brexit advisers are secretly considering whether Britain could strike a customs union deal covering trade in goods with the EU, a move that would severely limit the UK’s ability to strike out on its own. Senior British officials argue that such a step would limit a loss of trade with Europe after Brexit, help address concerns about the north-south Irish border, and reduce the need for complex new customs procedures. The Financial Times has been told by three UK officials that the discussions are “live” in Whitehall. One official close to Mrs May confirmed the plan — which would take effect after a transition period of about two years following Brexit in March 2019 — was one option being considered. “If we can find a way of keeping goods in the customs union and retaining some independence on trade — particularly on services — we should look at it.” – FT (£) > David Paton on BrexitCentral today: Why Labour should embrace free trade and campaign to stay out of the EU Customs Union Jacob Rees-Mogg stands by raising claims Treasury officials are trying to influence policy On claims officials are attempting to influence policy, Mr Rees-Mogg said: “It is a worrying suspicion. I think on this whole issue the thing I’m really concerned about is that you get a week ago the CBI coming out and saying it’s really important that we stay in the customs union. You then get the Chancellor in Davos saying the CBI is – the EU-funded CBI as we ought to call it – a wonderful organisation and we should have as modest a Brexit as possible and remain closely aligned. And then a few days after that you have a leak of a Treasury-designed economic model that says the only thing to do is stay in the customs union. You just wonder whether there isn’t a pattern in that. Whether there isn’t some orchestration rather than being an accidental constellation of the stars.” Mr Rees-Mogg claimed the Treasury was deliberately producing forecasts that show a negative outcome. “It’s exactly what they did prior to the referendum, so it is of a piece,” he told the audience at the east London university. – Sky News “So what Charles Grant did or didn’t say at lunch doesn’t really matter very much and I never claimed to have heard it. What does matter is that he broadly indicated this in a tweet and it fits in with the facts and it is why you can so suspicious of these forecasts because they are designed to a particular end and the end is to say the only thing we should do, lo and behold, is stay in the Customs Union, which basically means not leaving the EU.” Asked directly if he believed civil servants were skewing the evidence, Rees Mogg took aim at the Chancellor, indicating he did not believe Hammond had reformed the department since taking over from George Osborne. He said: “I think the blame should always lie with ministers, actually. And we knew very clearly before the Brexit vote that the Treasury was being guided very strongly by the then Chancellor of the Exchequer and it is the Chancellor of the Exchequer who has to take responsibility for his department.” – Huffington Post Steve Baker accepts mistake in civil service ‘conspiracy theory’ row – BBC News Leave Means Leave demand enquiry into leaked Treasury report following Grant revelations – Express Charles Grant did say Treasury pushing Government towards softer Brexit – Guido Fawkes Heywood hits back – Guido Fawkes Jacob Rees-Mogg cements lead as favourite with Tory members to take over from Theresa May after minister threatens to resign to force her out – The Sun Conservatives dump their dirty laundry on the despatch box – Katy Balls for the Spectator Don’t fall for the prophets of economic doom – Ed Conway for The Times (£) > Hugh Bennett on BrexitCentral today: If civil servants want to play politics with Brexit, they must stand up and be held to account like politicians Residency rights during Brexit transition non-negotiable, insists Guy Verhofstadt… A Brussels demand for full, automatic and permanent residency rights for all European Union nationals coming to Britain for almost two years after Brexit is “not negotiable”, Guy Verhofstadt said yesterday. The European parliament’s Brexit negotiator has responded to Theresa May after the prime minister insisted that migrants from the EU coming to Britain during a transition period after it leaves the bloc would not have full rights. “The maintenance of EU citizens’ rights during the transition is not negotiable,” Mr Verhofstadt said, reminding Mrs May that MEPs have a veto over a final deal. “We will not accept that there are two sets of rights for EU citizens. For the transition to work, it must mean a continuation of the existing acquis [EU law] with no exceptions.” The EU’s position is that the cut-off for residency rights will be December 31, 2020, at the end of a transition requested by Britain, not, as the UK government has said, on Brexit day on March 29, 2019. – The Times (£) Leaked Brexit analysis reveals EU migration will fall by 40,000 a year under free trade deal – Telegraph (£) EU chief Timmermans snubs Theresa May by saying he no longer believes her on Brexit – The Sun May’s disgraceful treatment of EU citizens shows her small mentality – Alastair Benn for Reaction The EU is moving the goalposts on immigration. Theresa May must stand firm – Telegraph view The government cannot afford to get bogged down in arguments about the Brexit implementation period when time to talk about trade is so short – The Times leader (£) …as Brexit officials raise prospect of transition deal deadline slipping U.K. and European officials are concerned that a March deadline to pin down the crucial Brexit transition deal may slip, according to four people familiar with the situation… But amid pressure from euroskeptics, the U.K. government has vowed to fight Brussels on some of the conditions, including a change in the EU’s stance on the sensitive issue of EU migration. The U.K. side is also concerned that France, which has consistently taken a hard line in the EU’s internal Brexit discussions, might try to stymie progress. The U.K. government has discussed the possibility that it might be in France’s interests to delay the transition accord in order to bolster its efforts to lure banks from London to Paris, according to three of the people, who declined to named. – Bloomberg Europe won’t need London finance, claims France – Bloomberg Anti-Brexit groups join forces under Chuka Umunna The main groups opposed to a hard Brexit are joining forces under the leadership of Chuka Umunna to push for the public’s voice to be heard on Theresa May’s final deal to leave the EU. The groups, representing more than 500,000 members, are putting aside their differences to work together as the grassroots coordinating group (GCG) at a time when polling suggests the public’s appetite for a second referendum is growing. Those involved in the group include Conservative MP Anna Soubry; Caroline Lucas, co-leader of the Green party and MP for Brighton Pavillion; and the Lib Dem MP Jo Swinson… GCG will include the all-party parliamentary group on EU relations, Open Britain, the European Movement, InFacts, Scientists for EU, Healthier IN the EU, Best for Britain, The New European and a string of others. – Guardian UK starting salaries rise to highest since before Brexit vote U.K. starting salaries have climbed to the highest level since before the Brexit vote — a further indication that the tightness in the labor market is starting to lift pay growth. Advertised salaries climbed 1.9 percent in the year to December and are starting to “show signs of sustained growth,” employment search company Adzuna said in a report Friday. The increase takes the average advertised wage to 32,940 pounds ($47,000), the highest level since May 2016… While inflation, currently running about 3 percent, continues to outstrip pay gains, the decline in real income may soon come to an end. Carney sees it happening later this year as price growth cools and wage growth slowly improved. – Bloomberg Ambrose Evans-Pritchard: The EU refuses a soft Brexit, so we must invoke the WTO immediately Those who called for a clean Brexit from the outset were right. The Franco-German axis is determined to make a soft arrangement impossible. Any further talking at this point wastes time and tightens the noose around our own necks. If Britain is to leave the EU – as it must, after a clear popular vote, endorsed by Parliament, and written into the Tory and Labour manifestos – the only way to do so with economic and political coherence is to reassert full sovereign self-government… Berlin, Paris, and Brussels have stated with crystal clarity that no deal on services is available. The only free trade pact they are willing to offer is on goods. This is prohibitively asymmetric: it locks in their huge surplus (mostly German) in manufacturing, while locking out Britain’s surplus in services, which partly compensates. Those who talk loudest about cherry picking pick the biggest cherries. What the EU is offering is not a deal worth having… The latest provocation is an internal strategy paper leaked to the Financial Times showing that the EU intends to tie Britain down after Brexit by prohibiting or curbing future moves to cut taxes, to deregulate, to carry out an industrial strategy, or make changes to employment law, all under pain of sanctions… The tone of this strategy document is insulting and belligerent. Yet that is the diplomatic reality we now face. Mrs May should walk away politely. – Ambrose Evans-Pritchard for the Telegraph (£) Ryan Bourne: Yes, Brexit will test our economic fitness, but we can emerge healthier The UK does far less trade with the EU than gravity models would predict, suggesting membership is less important for our exports than for others (Coutts finds an uplift of 20pc to 25pc rather than the Treasury’s 115pc). This is not surprising given we specialise in services (where the single market is less complete) and tend towards low levels of regulation anyway. Again, the implication is leaving will be less costly than these models predict… A service-based economy such as the UK remaining in with no voting rights would not only open us up to potentially damaging future regulation of financial services (the potential for which was no doubt ignored by this report). But it would also close off opportunities to undo existing damaging regulation, which bites hard on the efficiency of the energy, farming and financial sectors. Then there are the alternatives. This kind of modelling in the past has ignored the shifting centre of gravity of global trade. Germany’s GDP is expected to grow just 14pc between now and 2030, while India’s is expected to double. Yes, there may be short-term trade disruption today from leaving the EU’s single market and customs union. But if it positions Britain to have the freedom to pursue more effective and more rapid free trade deals with fast growing nations, then it makes no sense to lock ourselves in to vassal state-style regulation in perpetuity. – Ryan Bourne for the Telegraph (£) Christian May: The City has its Brexit optimists – are they complacent or correct? During the referendum campaign I spoke at enough events and debates to know that plenty of City folk were planning to vote Leave. Not many, granted, but enough to remind us all that the City isn’t a homogenous mass. Nevertheless, what struck me most about this week’s dinner and discussion was the emergence of a recurring observation from the guests: Europe, they maintained, ain’t the future. If you’re interested in global markets, growth opportunities and the next big thing, their theory went, one must look well beyond the borders of Europe… The general consensus was that, in the grand scheme of things, London will survive as a dominant global financial centre. If their confidence scares you, take heart in the fact that there’s no such complacency among the City’s policy-makers and their allies in Westminster. Indeed, economist Gerard Lyons will release an important report on Monday regarding the future of the City, in which he sets out a number of practical and technical ways in which officials can ensure the City remains “on the front foot, competitive, vigilant and adaptive”. It will be well worth a read, especially by those who think the City’s historic advantages will guarantee its future. – Christian May for City A.M. David Campbell Bannerman: Brussels is starting to realise how much it needs our business An MEP colleague, former head of German industry through the BDI, recently announced that German business is “panicking” about the possibility of a no deal with the UK. He says the EU is only just waking up to the fact a post-Brexit UK will become the largest market for the rest of the EU. In the referendum, the notion the EU needed the UK market much was mocked, but now the cold factual reality is setting in. The UK is not some sad little island but the sixth largest economy in the world, has the largest financial centre in the world, and is the second largest importer after the USA. President Juncker has correctly analysed that the EU’s solidarity to date – who would argue with demanding billions more for the EU? – is about to break up as member states put their own trading and economic interests first. He fears big business will allow British “cherry picking” and that “in the end we’ll have several extras, several exceptions that will make Europe a mess”. – David Campbell Bannerman MEP for the Telegraph (£) Brexit comment in brief Brexit department creaking under weight of responsibility – Jennifer Guay for The Times (£) Brexit gives UK construction a chance to up its game – Mark Reynolds, Mace chief executive, for the Telegraph (£) Time running out for timorous May – Beth Rigby for Sky News UKIP loses Towler, the man who made Farage famous – Mark Wallace for ConservativeHome Brexit news in brief George Osborne: UK government indecision over Brexit will ’empower’ parliament – Politico Farage goes to Dublin to champion ‘Irexit’ – Bloomberg Dover MP Charlie Elphicke was suspended three months ago but still doesn’t know why – The Times (£) Five migrants shot in huge Calais brawl – BBC News