Michel Barnier has warned he “cannot guarantee” there will be a Brexit trade accord as Brussels saw Wednesday as its deadline to seal an agreement and sterling fell on no-deal fears.
The EU’s chief negotiator told the bloc’s national ambassadors and MEPs that important sticking points remained ahead of UK prime minister Boris Johnson’s stocktaking call with European Commission president Ursula von der Leyen at 4pm on Monday.
In closed-door meetings on Monday morning, Mr Barnier said that about 10 hours of talks with his UK counterpart David Frost and his team on Sunday had failed to yield breakthroughs on the main outstanding issues of fishing rights in UK waters and fair competition rules for business.
He dismissed claims that a deal on fisheries was at hand, despite negotiators working until midnight, and insisted that talks remained difficult. He told MEPs that the talks were in their final days, with Wednesday the effective deadline, according to one participant at the meeting.
“The outcome is still uncertain, it can still go both ways,” said one diplomat following Mr Barnier’s briefings. “The EU is ready to go the extra mile to agree on a fair, sustainable and balanced deal . . . It is for the UK to choose between such a positive outcome or a no-deal outcome.”
Sterling lost more than 1 per cent against both the euro and dollar on Monday, on track for its worst one-day performance since September, amid news that the talks remained on a “knife-edge”.
Negotiations resumed on Monday, with time critically short to get a deal in time for the end of Britain’s post-Brexit transition period on December 31. EU leaders meet in Brussels for a planned summit on Thursday.
In parallel with the negotiations, UK Cabinet Office minister Michael Gove arrived in Brussels to discuss the implementation of last year’s divorce treaty with the EU, including its arrangements for avoiding a hard border on the island of Ireland.
Increasing the strain on this week’s talks is Mr Johnson’s decision to press ahead with two contentious pieces of legislation that violate the terms of the EU withdrawal agreement. British MPs are expected on Monday to reinstate treaty-breaking clauses in the government’s internal market bill, while on Wednesday the House of Commons will hold its second reading of the taxation bill that also violates the withdrawal deal.
The UK government argues the new laws are necessary to safeguard intra-UK trade in case future-relationship negotiations fail with Brussels. But EU chiefs, such as European Council president Charles Michel, have warned that ratification of any future-relationship agreement will be impossible unless the UK scraps the controversial clauses.
Mr Barnier suggested to MEPs that he believed the offending provisions would be dropped if there were a trade deal.
On the question of fisheries the UK is resisting EU demands for countries such as France and Belgium to retain their historic fishing rights in the area six to 12 nautical miles off the British coast. The two sides are also still negotiating over the length of a multi-year transition period during which access for EU fishing boats to UK waters would be safeguarded.
EU diplomats said that a new complication had arisen because of British demands relating to the ownership of UK-registered fishing vessels.
Mr Barnier told MEPs that the UK was still resisting Brussels’ demands that European companies be able to challenge the British government before UK courts if London broke its commitments to a “level playing field” for EU and UK companies.
The EU is continuing to ask for clear guarantees from Britain that the treaty’s restrictions on the use of state aid can be enforced, including by making sure illegal subsidies are reimbursed. Mr Barnier said this was a problem for sectors such as energy and aviation.
Brussels also wants the right to take unilateral action to restrict UK access to the EU market in response to level playing field violations.