Flagging Brexit Negotiations Revive the Specter of No Deal Again

(Bloomberg) -- As trade talks with the European Union started to flag in June, Boris Johnson borrowed a phrase from a series of 1950s gasoline ads, promising he would “put a tiger in the tank” to rev up the negotiations.

As September approaches, it’s clear that engine has stalled. The negotiations now risk ending in failure.

The latest round of discussions in Brussels wrapped up this week without any progress. Both sides agree that on the most difficult topics -- access to British fishing waters and how closely the U.K. will stick to EU rules on state aid –- there has been virtually no movement since the process began in March.

“I’ve been frankly disappointed,” EU chief negotiator Michel Barnier said on Friday. “Johnson told us in June that he wished to speed up. This week, once again, as in the July round, the British negotiators haven’t shown any real willingness to move forward.”

U.K. officials share that gloomy assessment -- but blame the lack of progress on Barnier’s refusal to discuss the easy issues until the most difficult problems are solved. The result is deadlock.

British and EU officials now talk privately about the prospect of there being no deal. That’s a marked shift in mood from even a month ago when, despite the tough rhetoric in public, people close to the negotiations remained fairly positive.

It’s an outcome that would lead to a complete rupture in cooperation between the two sides in areas from aviation to security and leave businesses and consumers grappling with the return of tariffs and quotas for the first time in a generation.

Shadow Boxing

Both camps are starting to recognize that now the spring and summer shadow boxing is over, the sheer amount of work to get through before the deadline is enormous, and the differences that remain are monumental.

Even on the easy parts, “where there is a broad understanding between negotiators, there is a lot of detail to work through,” said David Frost, Barnier’s British counterpart. “Time is short for both sides.”

An agreement is still possible because both sides still want one and EU deadlines can be flexible. Where once the end of September appeared to be a hard deadline, even British officials who once wanted to reach an accord as soon as July no longer rule out allowing the talks to drift into October, even November, if one is in sight.

One thing, though, hasn’t changed: the U.K. government insists it will part ways with the bloc on Dec. 31, with or without a deal.

Johnson Announcement

In an effort to avoid the latter outcome, the British government plans to set out what its post-Brexit state aid regime will look like so the EU can soften its insistence that the U.K. remains tied to the bloc’s rules. Of particular concern to the bloc is the U.K.’s determination to be able to have its own regime for governing business subsidies.

Johnson is preparing to make an announcement in the next few weeks, people familiar with the situation said.

Two more negotiating rounds are scheduled next month, and officials on both sides say the deadlock needs to be broken very soon if the outcome is to be successful.

Since March, though, negotiators have been going round in circles, one British official said, adding that they had got to the point where in hours of discussions there was almost nothing left to say.

As if to underline that point, a visibly exasperated Barnier on Friday could only repeat a slogan of Johnson’s predecessor as prime minister to describe the situation. “Brexit means Brexit,” he said.

©2020 Bloomberg L.P.