A delegate reads a pro-Brexit document during the Conservative Party annual conference in Birmingham, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

The Seven-Day Brexit Dash to Chart the Path to a Deal

(Bloomberg) -- Britain and the European Union will begin a frantic week of diplomacy on Wednesday aimed at thrashing out the final shape of the Brexit deal.

Negotiations have effectively been on hold as Prime Minister Theresa May navigates the political perils of her Conservative Party’s annual conference. When the Tory gathering wraps up on Wednesday, both sides will get back to work, with the goal of signing the deal in mid-November.

The Seven-Day Brexit Dash to Chart the Path to a Deal

“We are entering the toughest phase of the negotiations,” May told the conference on Wednesday. “What we are proposing is very challenging for the EU, but if we stick together and hold our nerve, I know we can get a deal that delivers for Britain.”

Brexit Secretary Dominic Raab is planning to visit Brussels next week and expects progress on the thorny issue of the Irish border, according to a senior official who declined to be named. Diplomats in Brussels said they expect the contours of the exit agreement to emerge by the middle of next week. May’s team also expects a more detailed response from the EU to her proposal for a future trade accord within days, the official said.

Talks have been all but deadlocked since March, and there are now less than six months until the U.K. leaves the bloc. Two key issues still need to be fixed: the overall shape of the future trade arrangements between Britain and Europe, and the so-called backstop guarantee to avoid a hard border with Ireland.

“We want a deal,” European Commission President Jean-Claude Juncker told the bloc’s parliament in Strasbourg, France, on Tuesday. “Those who think that a no-deal would be the better solution are not aware about the difficulties such a scenario would imply.”

In the days ahead, the EU will finalize its positions on the Irish border and the two sides’ post-Brexit economic and trading relationship, according to European diplomats. The U.K. will also put forward fresh compromises.

Then on Oct. 10, ambassadors from the 27 EU countries expect to be able to make concrete plans for this month’s critical EU summit on Oct. 18.

Share the Load

British and European officials have been working separately on solutions to the impasse over the Irish border backstop, a legal guarantee to ensure that the frontier remains free of checks on goods after Brexit. It would kick in after the U.K.’s transition period ends at the start of 2021 and last until future trading arrangements make it unnecessary.

A senior British official said that to get a deal on the backstop, the U.K. wants the burden to be shared between the U.K., the European Commission, Northern Ireland and the Republic of Ireland. Both sides have signaled they are willing to show some flexibility and the U.K. is drafting a new proposal. Still, fundamental differences persist.

In private, EU diplomats don’t reject the U.K.’s new proposal outright, but they say it may come with conditions that would make it unpalatable in Britain. If May wants to keep the whole U.K. aligned with the bloc’s trade regime, the entire country would probably have to remain subject to the EU’s trade pacts with the rest of the world. The European diplomats said the backstop can’t be defined as “temporary,” and there can’t be a time limit as the U.K. wants.

The Seven-Day Brexit Dash to Chart the Path to a Deal

As part of the seven days of intense negotiating activity, Irish Prime Minister Leo Varadkar will consult with the EU’s chief negotiator, Michel Barnier, and EU President Donald Tusk in Brussels on Thursday. On Friday Barnier meets the leaders of small Northern Irish parties.

Then next Tuesday, Barnier is scheduled to meet Arlene Foster, the uncompromising leader of Northern Ireland’s Democratic Unionist party, which props up May’s government in London and almost blocked an interim deal last year.

Once the terms of the U.K.’s exit are settled, negotiators will turn to the future trading relationship between Britain and the EU.

So far, there’s little agreement over the nature of those ties, meaning that the pact could be as short as three pages in length, one diplomat said. That would leave much of the detail to be negotiated only once the U.K. has left the bloc.

The U.K. wants and expects a much fuller document, according to the British official. Barnier is already drafting the declaration -- which isn’t legally binding -- and will present it to European commissioners shortly before the Oct. 10 meeting.

Under the EU’s plan, the bloc would present May with the details of the final sticking points at the summit in mid-October, before signing off on the agreement a month later.

There’s much that can still go wrong, however. Despite efforts to drive progress, some officials on each side think it could be as late as January before a deal is done. The U.K. needs to take major concessions over how it sees its post-Brexit relationship, European diplomats said.

It has to abandon the notion that it will be able to establish “frictionless” trade with the bloc, and drop other red lines contained in May’s so called “Chequers” blueprint for the future relationship.

The Seven-Day Brexit Dash to Chart the Path to a Deal

May angered her fellow EU leaders at a summit in Salzburg, Austria last month by depicting their choice as “Chequers or no-deal,” one EU diplomat said. If she does that again, the EU will accelerate preparations for a divorce without a deal, the diplomat said.

But if May tells leaders “it’s most of Chequers or no-deal,” then the EU can negotiate, the diplomat said.

©2018 Bloomberg L.P.