Soldiers walk past the European Commission Berlaymont building in Brussels, Belgium. (Photographer: Jasper Juinen/Bloomberg)

`No Deal' Brexit Warning on EU Table as Barnier Talks Risk

(Bloomberg) -- The European Union’s 27 remaining leaders may warn the U.K. that it faces crashing out of the bloc without a deal and call for contingency preparations, as an update due from the Brexit negotiators is set to highlight the limited progress made since March.

With Brexit negotiations slowly meandering toward the end of the latest three-month period as lawmakers in London bicker over the course the U.K. government should take, diplomats from the EU’s 27 other countries are now seriously considering whether a statement following a summit next week should say that “no deal” is a real proposition, according to two people familiar with the discussions.

In a double plan of attack, they may warn their own governments to step up contingency planning to cope with the potential fallout of Britain falling over the cliff, while reiterating to the U.K. that its post-Brexit transition period won’t happen if a deal isn’t approved.

`No Deal' Brexit Warning on EU Table as Barnier Talks Risk

“There’s always a risk,” the EU’s chief Brexit negotiator, Michel Barnier, told a behind-closed-doors meeting of Austrian lawmakers in Vienna on Monday, according to an official summary. More preparation work needs to be done in the EU’s capitals in case of a collapse of the talks, he told the lawmakers.

The summit, once billed as a final staging post in the negotiations before a concluding meeting in October, now looks set to focus on what hasn’t been agreed on rather than what has. The issue of how to keep the Irish border invisible has become the biggest sticking point and has seen hardly any progress since the U.K. made proposals two weeks ago, officials say. The EU leaders will probably call for talks to accelerate over the next few months to get an agreement on time and avoid a no-deal situation.

Political Issues

While U.K. and EU officials are holding low-level negotiations in Brussels this week, they’re unlikely to unblock the biggest political issues. Tuesday will see officials focus on the Irish border, while officials will turn to the future relationship on Wednesday.

The negotiators are planning to publish a report as early as Tuesday on progress in the Brexit withdrawal agreement since the last summit in March. While there has been some movement on the more technical aspects of the U.K.’s divorce from the bloc it joined in 1973, the document is likely to underscore that the Irish border, the extent to which the European Court of Justice will rule on disputes arising from the Brexit treaty, as well as the issue of whether the U.K. will recognize the EU’s special status labeling for food and drink, remain largely unresolved.

These items form part of the broader Brexit deal that must be struck if the U.K. is to keep trading relations in place and benefit from the 21-month transition period that was provisionally agreed on earlier this year.

Among the concerns on the EU side is that there still won’t be an accord by the time EU leaders hold a summit on Oct. 18-19. EU officials increasingly see talks not being concluded until December, a person familiar with the matter said.

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