EU says it will offer UK post-Brexit deal ‘unlike any it has given another country’

Pound rallies on apparent good news but fundamentals appear unchanged – so far

The EU is prepared to offer Britain a trade deal unlike any it has ever offered another country, the bloc's chief Brexit negotiator has said.

Michel Barnier however reiterated that the European Union would not divide or change the single market for Britain, warning: “We respect Britain's red lines scrupulously. In return, they must respect what we are.”

Though Mr Barnier has repeatedly said the bloc is ready to offer its “most ambitious” free trade agreement ever to Britain, markets appeared to interpret his latest comments as suggesting he was close to a deal – causing sterling to jump up by 1 per cent.

“We are prepared to offer a partnership with Britain such as has never been with any other third country,” the negotiator told reporters following a meeting with the German foreign minister in Berlin.

But Theresa May’s unofficial Brexit minister David Lidington, who coordinates Cabinet activity around leaving the EU, said the UK would only accept the Chequers deal or a no-deal.

“With exactly seven months until the end of the article 50 process and less than two months ahead of the October European council, we face the choice between the pragmatic proposals we are discussing now with the European commission, or no deal,” he told French business leaders in a speech on Wednesday.

“I truly feel that we are at a fork in the road. There are trends on both sides of the Channel, both sides of the North Sea, and both sides of the Atlantic that could see us drift apart.”

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EU warns Brexit will cause disruption with or without a deal

Still speaking in Berlin on the same day Mr Barnier said the Norway model was available to Britain if it wanted access to the single market; he has previously said the only model which would cause no disruption was membership of the single market and a customs union with the EU.

Theresa May’s Chequers proposal, which Mr Barnier has effectively ruled out, asks for frictionless trade based on access to the single market for goods through a “common rulebook”, as well as no customs checks through a bespoke customs system.

Mr Barnier has outright rejected the customs system, stating that the EU cannot delegate its customs controls to a non-member state and that it is too bureaucratic.

He has also raised concerns that the plan for a single market only for goods would give an undue “significant competitive advantage” to Britain at the EU’s expense, and suggested that the bloc would also be breaching its duty of care to European consumers.