You are using an older browser version. Please use a supported version for the best MSN experience.

Brexit Talks Edge Backward as Time-Pressed U.K. Braces for Worst

Bloomberg logoBloomberg 6 days ago Ian Wishart and Emma Ross-Thomas

U.K. Prime Minister Theresa May Attends Weekly Questions And Answers Session © Bloomberg U.K. Prime Minister Theresa May Attends Weekly Questions And Answers Session

With Brexit talks stuck, the U.K. is preparing for the worst.

As the fifth round of negotiations draws to a close on Thursday, progress is so scant that the European side is stepping back from concessions it was said to be considering last month.

The Commission won’t talk about trade before getting assurances that the U.K. will pay its dues, and with just 18 months to go until the country tumbles out of the bloc, the focus in London has turned to contingency planning.

Enter Philip Hammond, the pro-EU chancellor of the exchequer,who says he’s reluctant to spend cash on a Plan B just to score negotiating points. When pressed, he said he would start releasing money as soon as January if progress hadn’t been made in talks.

Judging by the latest EU rhetoric, the chances of that happening are up. The goodwill that Prime Minister Theresa May generated in her speech in Florence, where she promised to pay into the EU budget for two years after Brexit and asked in return for a transition period so businesses can prepare for the split, hasn’t translated into progress in talks.

Meanwhile May’s Conservatives remain deeply divided on the shape of Brexit, with the premier struggling each week to tread a careful line between rival camps. The political establishment is so conflicted that late on Wednesday two politicians from opposing parties joined forces to try and effectively bind May’s hands by enshrining a two-year transition into law.

All Talk

While four months of talks have brought the EU and U.K. closer on the issue of citizens’ rights -- an area where both were keen on a quick agreement -- the thornier issue of the financial settlement remains a stumbling block. Last week people familiar with the situation said the U.K. hadn’t accepted that it’s liable for a share of the pensions of EU staff.

Key Speakers At The Conservative Party's Annual Conference © Bloomberg Key Speakers At The Conservative Party's Annual Conference

Brexit Secretary David Davis has pledged publicly to go through the EU’s financial demands line by line. May’s political capital has diminished since losing her parliamentary majority and the latest polling showed 70 percent of the British electorate opposed to paying a divorce bill of about 30 billion euros ($35.6 billion), which is far less than what the EU sees as the U.K.’s liabilities.

So as the EU pushes for a greater commitment from Britain on the bill, the U.K. argues that some of the divorce issues can’t be worked out until the future relationship is clearer.

U.K. Prime Minister Theresa May Attends Weekly Questions And Answers Session © Bloomberg U.K. Prime Minister Theresa May Attends Weekly Questions And Answers Session

At the same time May wants to cement the terms of the transition deal it seeks so that businesses can plan ahead -- the headlines of banks relocating and foreign companies cutting jobs is more bad news an embattled premier doesn’t need.

Too Rigid?

Hammond expressed frustration on Wednesday that the EU was being too rigid with its schedule, which sets out that separation issues will be dealt with first and only then will they move on to trade and the transition.

Last month, people familiar with the situation said that EU leaders were considering expanding EU Brexit Chief Michel Barnier’s mandate in October to include discussions on the transition. Those hopes were dashed on Wednesday, when an EU official said it was unlikely to happen.

Watch: How likely is a second referendum?

UP NEXT
UP NEXT

Confirming what has long been suspected, the official said leaders at a summit next week will almost certainly say not enough progress has been made to move on to trade talks. December is now the next possible date to reach that milestone, leaving the U.K. with less than a year to sketch out a future relationship with its most important trading partner.

The government has spent the last week emphasizing its contingency plans in case talks break down without a deal. The first announcements emerged from the Conservatives’ party conference, followed by some technical papers that set out policy proposals

The more ardent supporters for Brexit within May’s party want solid plans in place so that walking out is a viable option -- a negotiating chip -- and have been pressing the government to take it seriously.

Leaving without a deal could be catastrophic for the U.K. economy, plunging into legal limbo everything from flights to life-saving drugs. The government continues to say it wants to strike a deal, and the EU puts forward a similar line but in reality talks are turning into a game of brinkmanship.

Hammond on Wednesday said the U.K. had to plan for talks ending in a “bad-tempered” way and cooperation on crucial issues such as data-sharing being blocked.

“Some are urging me to spend money to show the EU we mean business,” he said. “I think the EU know we mean business.”


AdChoices
AdChoices
image beaconimage beaconimage beacon