LONDON, ENGLAND - JANUARY 17: British Prime Minister Theresa May delivers her keynote speech on Brexit at Lancaster House on January 17, 2017 in London, England. It is widely expected that she will announce that the UK is to leave the single market. (Photo by Kirsty Wigglesworth - WPA Pool /Getty Images)

What has Theresa May said?

The Prime Minister set out 12 priorities for negotiating a new relationship with the EU, after Britain narrowly voted to leave the bloc on 23 June.

The headline is that we will be pulling out the EU’s Single Market and will not remain a full member of the Customs Union either.

In other words, the UK is heading for a “hard” or “clean” Brexit scenario, rather than a Norway-style relationship, where we would have continued to enjoy substantial access to the Single Market in exchange for accepting rules like the free movement of EU citizens.

Will it hurt the economy?

That is a matter of fierce debate. Before the referendum, economists at the Treasury and at many independent institutions tried to warn about the potential long-term effects of Brexit.

Most made the assumption that a “softer” Norway-style option would be the least harmful to the economy.

Instead, Britain will now seek to negotiate a bespoke free trade deal with the EU. This could be a lengthy process, and until a deal is reached, trade could suffer.

Outside the EU, British businesses could now face tariffs (taxes which raise the price of imports), customs checks at the border and restrictions on financial services and other sectors.

A bold free trade agreement could remove some of these barriers and leave Britain free to negotiate deals with other countries, which it cannot do now as an EU member.

BRISTOL, ENGLAND - JANUARY 16: In this photo illustration, One Pound coins are seen besides US Dollar bills on January 16, 2017 in Bristol, England. Sterling has dropped sharply following reports that British Prime Minister Theresa May is to announce that the UK is planning a so-called 'hard' exit from the European Union. According to the exchange firm Travelex, UK travellers buying US Dollars are now getting the lowest rates since 1986, being offered just $1.17 for every pound. (Photo by Matt Cardy/Getty Images)

How have the markets reacted?

Several media outlets have reported that the value of the pound “soared” against other currencies as Mrs May made her speech.

Sterling certainly rose on Tuesday afternoon. At time of writing, the pound was on track for its biggest daily climb since October 2008. But it’s important to remember the context: the UK currency is still trading well below pre-referendum levels.

The FTSE 100 index of leading shares dipped, but that’s not surprising, and it’s not a sign of negative reaction to the Prime Minister’s words. A rising pound hits companies who report their earnings in dollars.

What if we don’t get a free trade deal?

There was a threat implicit in today’s speech. Failing to agree a mutually beneficial trade deal would be an act of “calamitous self-harm for the countries of Europe”, the Prime Minister said.

Some analysts think the UK will become the EU’s single biggest trading partner for goods after we leave – although it’s debatable who needs who the most.

“We would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain”, Mrs May added.

In other words, if the EU tries to punish the UK in trade negotiations, it will face a big competitor on the doorstep prepared to slash business taxes to entice investment to this side of the Channel.

Is this what Britain voted for?

Different Leave campaigners said different things about what they wanted to happen after a Brexit vote.

It’s fair to say that while a few individuals were open about wanting to leave the Single Market, many were ambiguous about what they wanted, or openly said that staying in would be a good option.

The question of whether Britain would remain a member of the Single Market was not on the ballot paper on 23 June, and there was always going to be uncertainty about our future relationship with the EU.

Will we keep EU laws?

Theresa May said the existing body of EU law will be converted into British law. It will then be up to parliament to change or repeal laws on a case-by-case basis.

But the European Court of Justice will no longer have jurisdiction here. Britain might have been obliged to follow ECJ decisions if it remained in the Single Market.

What will Scotland do?

Nicola Sturgeon reacted angrily to Mrs May’s speech, warning that exiting the Single Market would be “economically catastrophic”.

The Scottish First Minister had said she wanted to remain the UK to remain in the Single Market – or see Scotland remain inside the market separately.

Ms Sturgeon said a second Scottish independence referendum is now more likely.

Opinion polls have generally showed falling support for independence since the September 2014 vote, although we don’t know if today’s news will change that.

The Scottish Conservative leader Ruth Davidson said Mrs May had tried to accommodate demands from the SNP in her speech today, including emphasising the protection of workers’ rights and the rights of EU citizens living in Britain.

Cars cross the controless border between Ireland and Northern Ireland, in Donegal, Ireland on June 25, 2016. The result of Britain's June 23 referendum vote to leave the European Union (EU) has pitted parents against children, cities against rural areas, north against south and university graduates against those with fewer qualifications. London, Scotland and Northern Ireland voted to remain in the EU but Wales and large swathes of England, particularly former industrial hubs in the north with many disaffected workers, backed a Brexit. / AFP / PAUL FAITH (Photo credit should read PAUL FAITH/AFP/Getty Images)

What happens to the border with Ireland?

Irish Republican party Sinn Fein said leaving the EU’s Customs Union could mean the reintroduction of a hard border between the Republic of Ireland – an EU member – and Northern Ireland, which will leave the bloc along with the rest of the UK.

But Mrs May specifically said she does not want to see that happen and will make it a negotiating priority to try to maintain the open-border Common Travel Area between the Republic and Northern Ireland.

Is there a chance all this won’t happen?

The Prime Minister said that the final UK/EU deal will have to be approved by a vote in both Houses of Parliament.

There was some suggestion today that currency market enthusiasm for Mrs May’s speech was a reaction to this point – suggesting optimism that parliament could somehow scupper the Brexit process. But it’s impossible to say for sure what the markets are thinking.

The Brexit secretary, David Davis, later said that the process of EU withdrawal will still go ahead even if MPs vote against the deal.

Legal wrangling over Brexit continues, with the Supreme Court yet to give a ruling on whether the government or parliament has the final say in triggering Article 50 of the Lisbon Treaty – the starting gun for the two-year withdrawal period.

The government appealed after High Court judges said the power rested with parliament.

In a separate application for a judicial review, four anonymous claimants are now arguing that parliamentary approval is also needed to leave the European Economic Area as well as the EU.

It remains to be seen whether MPs would vote against the referendum result if they were given the power to ratify it.

Article topics