Theresa May’s hopes of an early start to trade talks with the EU have suffered a serious setback, after Brussels’ chief negotiator said more time was needed to thrash out a Brexit divorce deal first.
Michel Barnier announced that he will tell leaders of the remaining 27 EU nations at a Brussels summit next week that insufficient progress has been made in divorce talks to be able to move on to negotiations on the bloc’s post-Brexit relationship with Britain.
His recommendation makes it all but certain that trade talks will be delayed at least until the end of the year, and will heighten pressure on the UK Government to make preparations for a possible “no-deal” Brexit.
Speaking alongside Brexit Secretary David Davis at the conclusion of the fifth round of formal talks in the Belgian capital, Mr Barnier said no “great steps forward” had been made this week and there remained a “disturbing” deadlock over how much the UK should pay to settle commitments entered into as an EU member.
He revealed that the size of the UK’s Brexit bill had not even been discussed during this week’s negotiations, after Britain refused to put a figure on the amount it was prepared to pay.
“On this basis I am not able in the current circumstances to propose next week to the European Council that we should start discussions on the future relationship,” he said.
The pound tumbled on the news, slumping 0.6% against the dollar to 1.31. Against the euro, sterling also dropped 0.6% to 1.10 euros.
The development came amid speculation of Cabinet rifts over spending on preparations for a “no-deal” Brexit.
Chancellor Philip Hammond said on Wednesday that he would delay until the last moment authorising millions of pounds of funding for facilities – such as beefed-up customs operations and lorry parks near ports – if talks end without a deal. His comments led to a wave of attacks from supporters of a hard Brexit, with the Daily Mail even branding him “treacherous”.
But leading Brexiteer Liam Fox insisted there was “no difference” between himself and Mr Hammond on the issue.
The International Trade Secretary told MPs in the House of Commons: “The Chancellor says that we need to spend money only as necessary. I think that’s correct. But we also need to ensure that we spend money on all areas where contingency plans are necessary.”
Dr Fox ducked out of a grilling on BBC Radio 4’s Today programme which was expected to focus on Cabinet infighting over Brexit, citing diary commitments.
Taking his place, Mr Hammond’s parliamentary private secretary Kwasi Kwarteng insisted that any apparent differences were down to “temperament”.
The Leave-backing MP said he did not see “much of a contradiction” between the Chancellor’s view on Brexit and Mrs May’s, telling Today that his boss was “clear-eyed” and has a “very realistic view” of the negotiations.
In Brussels, Mr Barnier held out the prospect of “decisive” progress in the Brexit talks by the time of the European Council summit scheduled for December 14-15.
But he insisted the EU would not make “concessions” on its key priorities of the rights of EU citizens living in the UK post-Brexit, the status of the Irish border and the UK’s “divorce bill”.
Meanwhile, Mr Davis urged EU leaders to change Mr Barnier’s negotiating mandate at next week’s summit in order to allow initial explorations of the issues around trade.
To give certainty to businesses and consumers, Britain and the EU “must talk about the future”, said the Brexit Secretary
“I hope the leaders of the 27 will provide Michel with the means to explore ways forward with us on that and build on the spirit of co-operation we now have.”
But Mr Barnier retorted: “To make a success of the negotiations we have got to do things in the right order. That is a condition of success.
“If we mix everything up, there are risks.”
Mr Barnier welcomed Mrs May’s high-profile speech in Florence for injecting “new momentum” into the Brexit process by making clear that Britain would honour financial obligations in the EU’s current multi-year budget.
But he added: “This week, however, the UK repeated that it was still not ready to spell out these commitments. There have therefore been no negotiations on this subject.
“On this question we have reached a state of deadlock which is very disturbing for thousands of project promoters in Europe and it’s disturbing also for taxpayers.”
Mr Davis said the time was not right for making “specific commitments” on the size of any bill, which he noted could only come later in the process.
Mr Barnier said talks would succeed only if Britain and the EU worked on “shared solutions” rather than demanding concessions from one another.
He told reporters: “There is no question of making concessions on citizens’ rights. There is no question of making concessions on the peace process in Northern Ireland.
“As regards the financial settlement, there is no question of making concessions on thousands of European investment projects throughout Europe.”
He added: “I’ve been saying since the Florence speech that there is a new momentum, and I remain convinced today that with political will, decisive progress is within our grasp in the next two months.”
Mr Barnier said the EU was ready to face “any eventualities” but warned that failure to secure an agreement would be a “bad” outcome.
“No deal will be a very bad deal,” he said.
Mr Davis said the UK was aiming for a deal but had to be ready for the alternatives.
“As the Prime Minister said yesterday, the UK is planning for all outcomes. It’s not what we seek, we want to see a good deal, but we are planning for everything.”
Labour called on Mr Davis to seek an additional round of emergency talks to try to make progress before next week’s European Council summit.
Shadow Brexit Secretary Sir Keir Starmer said: “Ministers have wasted months of the Brexit talks fighting amongst themselves.
“This increases the chances that Britain will crash out of the EU without a deal. That would be catastrophic for jobs and living standards and must be rejected as a viable option.
“The Government must recognise the gravity of the situation. They must drop their ideological red lines and work round the clock to find a resolution to the current situation.”