Theresa May, U.K. prime minister, arrives at a European Union (EU) leaders summit at the Europa Building in Brussels, Belgium (Photographer: Jasper Juinen/Bloomberg)  

U.K. Expects Brexit Deal With EU by November 21, Dominic Raab Says

(Bloomberg) -- British and European officials hailed progress in Brexit negotiations on Wednesday, with U.K. lead negotiator Dominic Raab predicting that a deal on the divorce will be finalized by Nov. 21.

In a letter to Parliament’s Brexit select committee sent Oct. 24 -- and published Wednesday -- Raab said “a great deal of progress” had been made in recent weeks, thanks in part to new British proposals for resolving the disagreement over the future of the Irish border. Separately, the Times reported Thursday that the two sides have agreed to a deal that would give U.K. financial services companies access to EU markets after Brexit.

The border impasse has clogged up negotiations for months, but Raab appeared hopeful of reaching a swift resolution. “Despite our differences, we are not far from an agreement on this issue,” Raab said in his letter to Hilary Benn, the committee chairman.

“I would be happy to give evidence to the committee when a deal is finalized, and currently expect 21 November to be suitable,” he wrote.

The government tried to downplay the significance of Raab’s remarks, after they were reportedly widely in the U.K. media. The Brexit Department said "there is no set date for the negotiations to conclude." However, one official said the letter, while a week old, still reflected current thinking.

The pound rose as much as 1 percent following news of Raab’s comments, before paring gains. In overnight trading in Asia, it strengthened as much as 0.7 percent to reach $1.2856.

Meanwhile in Brussels, EU officials sounded more optimistic than in the past, telling ambassadors on Wednesday that there is a more positive mood surrounding the negotiations. Still, two other EU officials were privately skeptical that a deal would be done by Nov. 21.

The Times cited unidentified government sources as saying envoys have finalized a deal on the future relationship in services and on the exchange of data. U.K. companies would be able to access EU markets so long as British financial regulation remained broadly aligned with EU rules, the paper said.

U.K. Expects Brexit Deal With EU by November 21, Dominic Raab Says

The EU has so far resisted calling a special summit to sign off a Brexit deal, which had been penciled in for mid-November.

Instead, the next time the leaders of the 27 remaining member countries in the EU are due to sit down with May -- potentially to sign the divorce terms -- will be at the European Council summit in December.

The U.K. has said the negotiations are 95 percent complete but progress remains blocked by a long-running disagreement over how to handle the passage of goods across the border with Ireland after Brexit.

Though both sides have promised to avoid the need for customs checks, they can’t agree on how to do it. In the U.K., May’s cabinet is divided over how hard to push the EU for a guaranteed limit on any temporary arrangements.

Earlier, Bloomberg reported Raab will be making his first visit to the Northern Ireland border on Friday to see the challenges for himself and inject fresh momentum into the talks.

The key issue for negotiators is how to keep goods moving freely across the border on the island of Ireland, without imposing new customs checks between Northern Ireland and the British mainland.

May has said no British prime minister could ever accept a customs border being set up effectively in the Irish Sea, because this would split up the U.K. and fundamentally undermine its constitutional integrity.

In February, the EU proposed a so-called backstop plan that would keep Northern Ireland in the bloc’s customs territory while the rest of the U.K. goes its own way after Brexit.

May has rejected this but proposed keeping the whole U.K. inside the EU’s customs and tariff rules as a last-ditch emergency option, if no other deal can be found to keep the border open.

Backstop Stalemate

In his letter, Raab confirmed that the EU now accepts the proposal for keeping the whole U.K. inside the bloc’s customs regime, rather than splitting off Northern Ireland. But there is still a disagreement over how and when any backstop measures should come to an end.

For May, this is critical. Pro-Brexit ministers in her cabinet -- including Raab -- want the U.K. to break free from the EU customs union as soon as possible. That’s because they see taking back the U.K.’s power to negotiate trade deals and set its own tariff rates as a key prize of Brexit.

The EU has rejected May’s demands for a clear end-date to the backstop, insisting that it will not be a guarantee worth having if it’s not indefinite.

Discussions are now focusing on other methods of bringing the backstop to an end, including the possibility of a review clause, under which the two sides could extend the procedure, if more time is needed, or end it if they want to.

The European Commission declined to comment on Raab’s letter.

Officials working for the EU’s chief Brexit negotiator, Michel Barnier, told ambassadors from the bloc’s remaining 27 countries Wednesday that while there’s a more positive mood around the talks, the two sides have yet to resolve the Irish backstop issue, according to a diplomat with knowledge of the meeting. Negotiators are currently looking at different alternatives to try to break the stalemate, the officials said.

©2018 Bloomberg L.P.