By Jenny Gross and Nicholas Winning

LONDON -- Prime Minister Theresa May said the U.K. intends to leave the European Union's single market, outlining a plan for a definitive break from the bloc and answering the biggest open question about her vision for Britain's future.

I n her most detailed speech yet, Mrs. May on Tuesday said the U.K. wouldn't seek a "half-in, half-out" relationship with the EU. Once it is out, she said, Britain would no longer abide by the bloc's immigration rules or be subject to jurisdiction of the European Court of Justice, which the EU insists are requirements for unfettered access to its market of 440 million consumers.

At times conciliatory and other times tough, the British leader described an independent U.K. with full control over its borders that would nonetheless maintain a close and friendly trading relationship with the EU. "We will continue to be reliable partners, willing allies and close friends," she said.

In comments that appeared to soothe investors, she said she would give lawmakers, a majority of whom backed staying in the EU, a vote on the final deal, adding she wanted a transition period to make the new relationship as smooth as possible.

Sterling rose by as much as 2.8% against the U.S. dollar, to $1.228 during the speech, after plummeting to a 31-year low on Monday after newspapers suggested she would take an uncompromising approach on leaving the single market.

"What I am proposing cannot mean membership of the single market," Mrs. May said. "Instead we seek the greatest possible access to it through a new, comprehensive, bold and ambitious free-trade agreement."

She said the U.K. wouldn't be seeking full membership to the EU's customs union -- by which members apply a common set of tariffs and import quotas to nonmembers.

"I want Britain to be able to negotiate its own trade agreements," she said. "But I also want tariff-free trade with Europe and cross-border trade there to be as frictionless as possible."

It is unclear what sort of preferential trade access EU leaders and officials would agree to give the U.K. Eager to discourage anti-EU movements across Europe, they have said there is no appetite for giving the U.K. a better deal than existing membership.

Jeremy Corbyn, leader of the opposition Labour Party, said Mrs. May seemed to want to "have her cake and eat it" by leaving the single market but still having access to it.

Leaving the single market will create uncertainties for U.K. businesses that rely on trade with Europe, particularly financial markets, auto makers and aerospace. Nearly half of British goods and services exports go to the EU, compared with 5% to India and China, two markets with which Britain aims to increase trade once it leaves the bloc.

Brexit supporters said they welcomed the tough position Mrs. May set out ahead of negotiations, which she is expected to trigger by the end of March.

"Britain must leave the EU at the earliest opportunity so that we can take full advantage of the huge benefits Brexit will bring," said Richard Tice, co-chair of Leave Means Leave.

A spokeswoman for Mrs. May said she hoped to speak to European leaders, including German Chancellor Angela Merkel and French President François Hollande, in the coming days about the speech.

Mrs. May said the negotiations would require imagination on both sides, as well as "give and take." A deal that punishes Britain to discourage other countries from taking the same path would be"calamitous," she said.

Czech EU Affairs Minister Tomas Prouza tweeted that the "UK's plan seems a bit ambitious -- trade as free as possible, full control on immigration...where is the give for all the take?"

German Foreign Minister Frank-Walter Steinmeier said after the speech that he welcomed Mrs. May's comments on wanting a constructive partnership and friendship with the EU.

Mrs. May said she planned for tough negotiations. "While I am confident that this scenario need never arise -- while I am sure a positive agreement can be reached -- I am equally clear that no deal for Britain is better than a bad deal for Britain," Mrs. May said.

Officials said if there is no free-trade deal, the U.K. would have to resort to World Trade Organization rules, meaning many U.K. exports to the EU would face new tariffs.

Mrs. May said without a trade deal Britain would still be free to set competitive tax rates and change its economic model, and warned that outcome could present the EU with "new barriers to trade with one of the biggest economies in the world."

Mrs. May said it was in the U.K.'s and EU's interest for there to be a period to phase in their new relationship, giving businesses enough time to plan and prepare for new arrangements.

U.S. President-elect Donald Trump said in a weekend interview that the U.S. wanted to come to a quick trade deal with the U.K., comments Mrs. May referenced in the speech.

Following her speech, some Brexit supporters called on Mrs. May to go further and set out a clear time frame for when the U.K. would no longer be subject to EU rules. "My worry is how long this is going to take and when we will start doing a deal with the U.S.A. and others," Nigel Farage, a chief Brexit campaigner and former leader of the anti-EU UK Independence Party, said from his Twitter account.

Mrs. May's confirmation that the U.K.would leave the single market marks a U-turn from comments before she became prime minister. In April, she warned that the EU accounts for a huge volume of Britain's trade and it wasn't realistic to expect the U.K. to replace European trade with new markets.

On Tuesday, she acknowledged her changed position, saying the economic indicators since the Brexit vote had been more positive than many economists had predicted.

European Council President Donald Tusk said on Twitter that the bloc was ready to negotiate the divorce. "Sad process, surrealistic times, but at least more realistic announcement on Brexit," he wrote.

--Valentina Pop in Brussels and Andrea Thomas in Berlin contributed to this article.

Write to Jenny Gross at jenny.gross@wsj.com and Nicholas Winning at nick.winning@wsj.com

(END) Dow Jones Newswires

January 17, 2017 15:16 ET (20:16 GMT)

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