London: Prime Minister Theresa May unveiled her Brexit blueprint on Tuesday, announcing for the first time that Britain will leave Europe`s single market in order to control EU immigration.

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In a highly-anticipated speech, May also warned the EU against imposing harsh terms on Britain`s historic divorce from the bloc after more than four decades of membership.

She also revealed that Britain would look to strike a new customs agreement with the EU to be able to carve out its own trade deals with the rest of the world.

In a concession to parliamentary critics, the Conservative party leader said lawmakers would also get a vote on any final Brexit agreement negotiated with Brussels.

EU leaders have insisted that single market membership means accepting free movement -- a key issue in Britain`s shock June referendum vote to leave the 28-member grouping.

"Brexit must mean control of the number of people who come to Britain from Europe. And that is what we will deliver," May told foreign ambassadors in London.

"What I am proposing cannot mean membership of the single market."

European Union president Donald Tusk said her speech gave a "more realistic" picture of what London wanted.

"Sad process, surrealistic times but at least more realistic announcement on #Brexit. EU27 united and ready to negotiate after Art 50," Tusk tweeted.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 said London could accept departing on such terms if Brussels played hardball, but it would hurt the EU more than it would damage Britain.

"No deal for Britain is better than a bad deal for Britain," she said.

May has promised to trigger Article 50 by the end of March, and said she was confident that final settlements could be negotiated within the two-year timeframe.

Seeking to calm fears of a sudden jolt to the economy on abruptly leaving the EU in 2019, May said she would seek a "phased process of implementation".

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.

The British currency has endured a rocky ride since the June vote, but sterling responded strongly to May`s speech, wiping out losses earlier in the week to stand at $1.2340.

"The prime minister has adopted a more pragmatic approach to Brexit than expected, providing some much needed relief for the pound," NFS Macro analyst Nick Stamenkovic told AFP.

Naeem Aslam, chief market analyst at ThinkMarkets, added: "The markets are going to be very much volatile in the weeks ahead.

"Just fasten your seatbelts."

HSBC analysts Simon Wells and Liz Martins wrote: "Prepare for a `hard` Brexit".May hinted that Britain might undercut the EU economically it faces the imposition of trade tariffs.

Excluded from the single market, May said London would be free to "set competitive tax rates" and "change the basis of Britain`s economic model", she said.

"There are some voices calling for a punitive deal that punishes Britain and discourages other countries from taking the same path.

"That would be an act of calamitous self-harm for the countries of Europe."

Anand Menon, a European politics professor at King`s College London university, said May had "resorted to threats".

"It might be precisely to keep the EU together that EU leaders agree to pursue a harsh approach," he told AFP.

Scotland`s nationalist First Minister Nicola Sturgeon said May`s speech had made Scottish independence more likely.

"The UK is heading for a hard Brexit, which threatens to be economically catastrophic," she said.

The British government "cannot be allowed to take us out of the EU and the single market... without Scotland having the ability to choose between that and a different future."May said Britain voted to leave because Europe had not been flexible enough for voters on key issues, but Britain nonetheless wanted the EU to succeed, not unravel.

She said Britain would remain a key intelligence and security partner in Europe, as she couched her speech as repositioning Britain as an outward-looking global trading player.

German Foreign Minister Frank-Walter Steinmeier said May had "finally brought a bit more clarity".

"We also want as good, close and trusting a relationship as possible and hope for constructive negotiations with this goal," he said.

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 negotiations.