Brexit Deal on Knife Edge After Day of Drama in Talks

(Bloomberg) -- Brexit trade talks headed into a decisive weekend with neither side confident of a deal after a frantic 24 hours exposed just how far apart the U.K. and European Union still are on an issue that’s hampered the talks since March.

With officials from both sides expecting a conclusion one way or the other within the next two days, talks resumed in Brussels on Friday afternoon -- but only after EU negotiators had spent the morning consulting their own national capitals over the scope for compromise on the issue of fishing rights. The U.K. rejected the bloc’s latest offer.

British and European diplomats close to the negotiations insisted it’s still just as likely that talks will collapse without a deal being struck as they are to end with an accord. It sets up a critical two days that will define the U.K.’s relationship with the bloc when the country makes its final break with the European single market on Dec. 31.

In a day of high drama:

• EU chief Brexit negotiator Michel Barnier warned the U.K. any deal must include powers for the bloc to hit Britain with trade penalties if it restricts access to its fishing waters
• Prime Minister Boris Johnson said on TV that the talks are now “difficult” and demanded the European side “see sense”
• Barnier and his officials spent Friday morning consulting with governments from EU coastal states, led by France, that have a significant interest in fisheries
• Negotiations with the U.K. resumed in Brussels in the afternoon but a fresh offer was rejected by the British
• A pale-faced French President Emmanuel Macron, the toughest of all EU leaders on Brexit, issued a video after testing positive for the coronavirus to say that he was being informed on the progress of the negotiations

The whole trade deal is increasingly hinging on how much the EU is prepared to give up of its fishing catch in U.K. waters. The British feel they have the upper hand after making concessions on the other major roadblock, a level playing field for businesses, in recent days.

A Handful of Fish

According to officials close to the negotiations, the U.K. on Thursday rejected an EU offer that would see the bloc lose around 22% of the current 650 million euros ($800 million) of fish caught annually in British waters. After consultation with the capitals on Friday, the EU offered 25% and this was again rejected. The U.K. is pushing the reduction to be closer to 60%, according to the officials who spoke on condition of anonymity.

To put that into context, the negotiations are snagged over fishing rights equivalent to about 0.01% of U.K. GDP. The British government’s own analysis in 2018 suggested the economy will be at least 2.6% smaller in 15 years’ time if there’s no trade deal.

The EU offered to reduced the phase-in period of the new arrangements to six years, after originally wanting 10. The U.K. rejected the offer of six and has proposed just three years.

The British see control of their fishing waters, previously under the jurisdiction of the EU, as a key element of the sovereignty that it is regaining with Brexit. For its part, the European side doesn’t want to give access to its single market without maintaining fishing rights in return.

“Our door is open, we’ll keep talking,” Johnson said. “There’s a gap that needs to be bridged. We hope that our EU friends will see sense and come to the table with something themselves.”

Officials said they expected talks to resume in Brussels on Saturday. On Saturday, French Europe Minister Clement Beaune told France Inter radio that his country wouldn’t be bowed by the Sunday deadline.

“It would be normal not to say, well it’s Sunday evening so let’s wrap it and sacrifice everything,” Beaune said. “It may be hard and sometimes tough to understand, but it’s necessary to take the time, and at any rate not to sacrifice our interests under the pressure of a calendar.”

Meanwhile Johnson will give a news conference at 4 p.m. London time, though it will be about new measures to tackle the rapidly rising number of Covid cases.

©2020 Bloomberg L.P.