UK sees only 30%-40% hope of deal as hard Brexit looms

The EU's chief Brexit negotiator Michel Barnier. File picture: Yves Herman

The chances of a hard Brexit – with Britain leaving the EU without a trade deal - have risen sharply as negotiations have been threatened by London’s insistence that it have full autonomy over its state aid plans, negotiators and diplomats have said.

Senior officials in the British government see only a 30%-40% chance that there will be a Brexit trade agreement due to the impasse, while one senior EU diplomat offered a 50-50 chance.

Fears in London, Brussels, and other European capitals are mounting that a British exit without a trade deal could sow yet more economic chaos amid the turmoil of the Covid-19 crisis which has hammered European economies.

“There has been absolutely no movement from the British side in the talks. If this approach doesn’t change quickly, we won’t be able to negotiate a deal in time,” an EU diplomat said. 

Failure to reach a trade deal could hammer financial markets as nearly a trillion dollars in trade, from car parts and medicines to lamb and fish, would be thrown into turmoil.

A british source close to the negotiations said the EU was slowing down negotiations and should understand that its demands on state aid and fishing were not compatible with Britain’s status as an independent country.

A British source close to the negotiations said the EU was slowing down negotiations and should understand that its demands on state aid and fishing were not compatible with Britain’s status as an independent country.

“We have also consistently tried to move discussions forwards but have been prevented from doing so by an EU which insists that everything must go at the pace of the most difficult issue,” they said.

“Their ask that we accept continuity with EU state aid and fisheries policy is simply not compatible with our status as a fully independent country,” they said.

Prime Minister Boris Johnson’s office said the goal was to reach a deal but that the EU needed to show more realism. For their part, EU officials are seeking clarity.

“Sooner or later, the UK should clarify what they want. It’s not possible to leave the European club and at the same time keep all the benefits,” European Council president Charles Michel said.

The current sticking point is state aid. The bloc’s Brexit negotiator Michel Barnier went to London on Tuesday to tell his UK counterpart David Frost that Britain must move on state aid, or there will not be an agreement, according to EU diplomats.

Afterwards, Mr Barnier said London had not shown enough flexibility and creativity.

He said: “The Commission now worries the next negotiating round will end up with nothing,” the EU diplomat said. “If the UK doesn’t move a bit on the state aid thing, we have a problem.” 

Britain does not want to allow Brussels authority over its state aid rules, stoking one of the Bloc’s greatest fears: that it shall one day face strong competition from an economy just outside its borders.

“There is a risk of a no-deal scenaraio at the end of the year,” an EU official said. “People need to be ready for that”.

- Reuters