U.K.’s Hammond Hails ‘Change of Gear’ in Brexit Negotiations

(Bloomberg) -- Brexit negotiators have stepped up the pace of talks in recent days, U.K. Chancellor of the Exchequer Philip Hammond said Friday, signaling the two sides are closing in on a deal.

Though the key issue of how to keep the Irish border open after Brexit must still be resolved, Hammond sounded optimistic that an agreement will be reached on the U.K.’s divorce from the bloc before time runs out.

“There has very definitely been a change of gear over the last 10 days,” Hammond told reporters on the sidelines of the International Monetary Fund meetings in Bali, Indonesia. “There is clearly a commitment to try to find a way forward.”

In an interview with Bloomberg TV, the chancellor said he was keeping a fiscal reserve ready to intervene if talks do end up in failure. Negotiations are on a knife edge, as the two sides seek to hash out the outline of the separation ahead of a key summit of EU leaders next week.

The major stumbling block in the talks has been reaching an agreement on a so-called backstop plan to avoid a hard border between the U.K. and Ireland.

Britain’s proposal is to extend its membership of parts of the EU’s customs union for an extra year, beyond the end of the planned transition period, until the new trade arrangements come into force.

Speaking to Bloomberg, Hammond confirmed an extra buffer period “probably” will be needed after the transition period ends in December 2020. But he warned that the backstop -- which would keep the U.K. inside the EU’s common external tariff -- must be temporary.

The need to limit the time Britain stays in the EU tariff regime is one of Prime Minister Theresa May’s biggest headaches, with pro-Brexit ministers threatening to quit if she keeps the country locked in indefinitely.

Some Conservative Brexit supporters want the U.K. to ditch the EU’s tariff so the country can set its own trade terms and have maximum freedom to strike trade deals around the world.

©2018 Bloomberg L.P.