May warns punitive Brexit deal would be 'calamitous' for EU

"Brexit must mean control of the number of people coming from Europe, and that is what we will deliver. What I am proposing cannot mean membership of the single market," May said during a highly-anticipated speech at London's Lancaster House.

She added that Britain would seek a trade deal giving "the greatest possible access" to the market on its departure.

The prime minister also announced that any divorce deal with the remaining EU members must be approved by votes in both chambers of Britain's parliament.

Britain has two years to negotiate a break-up deal once May triggers Article 50 of the Lisbon Treaty, officially declaring the country's intention to quit, or face leaving with no agreement.   

May has promised to trigger Article 50 by the end of March, and said that she believed a final settlement and trade deal could be simultaneously negotiated within the timeframe.

Foreign partners doubt such a timetable, with Austrian Foreign Minister Hans Joerg Schelling saying Brexit would take five years.

"It is not clear if it will be possible to negotiate the UK's exit from the EU and the terms of a future cooperation at the same time," he said.

Seeking to calm fears of a sudden jolt to the economy on abruptly leaving the EU, May said she would seek a "phased process of implementation".

Her direction will be cheered by those who want to leave the EU, but dismay those who fear the impact on Britain's economy.

EU countries accounted for 44 percent of Britain's total exports in goods and services in 2015, with the country recording a £68.6 billion ($82.7 billion, 77.9 billion euros) trade deficit with the bloc.

- Trump and trade deal -The British currency has endured a rocky ride since the vote last summer to leave the union, but sterling responded strongly to May's speech, wiping out losses earlier in the week to stand at $1.2340.

Britain's finance minister Philip Hammond adopted a tough line on Sunday, warning that Britain might undercut the EU economically to remain competitive if it faces EU tariffs.

Hammond said he wanted Britain to still be a "recognisably European-style economy with European-style taxation systems, European-style regulation systems."

However, London would have to change course "if we are forced", to "regain competitiveness", he told Germany's Welt am Sonntag newspaper on Sunday.

French Finance Minister Michel Sapin on Tuesday accused May's government of making up its negotiating policy on the hoof.

"No-one was prepared," he said. "You can see very well that they are improvising, with flip-flopping between accommodating positions... and harder positions."

Britain's post-EU prospects were given a verbal boost on Sunday by US President-elect Donald Trump, who said he favoured a quick trade deal with the UK.

But a fast-track bilateral deal with Washington will be difficult in practical terms.

Under EU rules Britain cannot sign trade deals with third party states until it is formally outside the bloc, a position that does not change despite voting to leave.

A two-year negotiating period is foreseen in EU legislation for any country choosing to exit the 28-member bloc.

The EU's chief Brexit negotiator Michel Barnier has said there should be an agreement in place ahead of the European Parliament elections in 2019.

But even if the prime minister's plan outlined on Tuesday wins widespread support, legal challenges could still scupper her Brexit timetable.

Britain's Supreme Court is due to rule later this month on whether May must seek parliamentary approval before triggering Article 50, which could delay the start of Brexit negotiations. DM