You shouldn’t lose any sleep over a no-deal Brexit – it almost certainly won’t happen

The resumption of face-to-face talks has oiled the wheels of UK-EU trade negotiations and a more positive picture is emerging

Andrew Grice
Wednesday 29 July 2020 11:34 BST
Michel Barnier: UK’s position makes a “trade agreement, at this point, unlikely”

On the face of it, little progress has been made in negotiations on a UK-EU trade agreement. Michel Barnier warns that one is “unlikely” and that time is running out (again). Both sides gear up for a “no deal” cliff edge when the post-Brexit transitional period ends on 31 December.

Behind the scenes, a different, more positive, picture is emerging. The resumption of face-to-face rather than the virtual talks during the lockdown has oiled the wheels. Barnier, the EU’s chief negotiator, has held four working dinners with David Frost, his UK counterpart, including one in London this week.

It didn’t make headlines, but Boris Johnson quietly dropped his threat to walk away if an outline deal had not emerged by last month. A sixth formal negotiating round will begin on 17 August. One EU source told me: “Things are finally moving in London. We will keep talking until the last possible moment.” One UK aide said: “The atmospherics are much better. There is real engagement now.”

Differences have narrowed. The EU has acknowledged the UK will never allow a deal to be policed by the European Court of Justice. In return, the UK has accepted the EU’s desire for an overarching agreement rather than a series of smaller ones.

But the biggest change is one of attitude. Johnson wants a deal and, more importantly, has realised he needs one. After at best a patchy performance on coronavirus, he needs a success story: to wave a treaty declaring there will be no tariffs or quotas in trade with the EU. (There will still be more red tape, such as customs declarations, for UK business, despite the Brexiteers’ promise to set them free.)

Johnson won’t get a United States trade deal until after November’s presidential election, despite boasts to the contrary. His Global Britain vision is floundering. He will trumpet an agreement with Japan, but it will mainly replicate the EU’s one. As for the Brexiteers’ hopes of a mega trade deal with China, the less said the better.

There was a time when some Brexiteer ministers liked the idea of burying the bad news of no EU deal under the coronavirus recession. But they now realise it wouldn’t wash with business or the new, independent-minded “blue wall” of Conservative MPs in the north and Midlands. A double hit on business would compound the jobs crisis; Johnson, as the architect of Brexit, would be blamed for that and any chaos at the borders, food shortages and panic buying.

No deal would be a Christmas pressie for Nicola Sturgeon, bolstering the case for Scottish independence when growing public support for a breakaway already rings alarm bells in Downing Street. No deal would allow Keir Starmer back into the Brexit game on economic grounds; portraying him as an arch-Remainer would have little traction.

Two obstacles to a UK-EU agreement remain. EU access to UK fishing waters is a sensitive and highly symbolic issue. But the industry is too small to be a deal-breaker. The one big roadblock is state aid. The EU wants an independent authority to police a UK regime that would be broadly in line with the EU’s, so the government could not help British companies undercut their continental rivals.

Unlike on fishing, the EU27 are united on this issue. Brussels is frustrated that London refuses to publish its state aid proposals. A major reason is that cabinet ministers are divided. Some influential voices, including Dominic Cummings, want the UK to retain a free hand, in line with Johnson’s more interventionist approach to the economy. The treasury, wary about being accused of “picking winners” among companies, wants strict, properly enforced rules, rather than a top-down approach that could allow the government to give itself a gentle rap on the knuckles for breaching them.

Some hardline Brexiteer backbenchers fear Johnson will sell them out by sticking close to the EU regime in order to clinch a deal, and will try to bounce them into swallowing a last-minute agreement. I suspect they are right to be worried. Although Johnson had hoped to secure an outline deal by this summer, a last-ditch one in September, October, or even later, would be easier to sell at home.

He will likely make concessions and declare victory, just as he did on last year’s withdrawal agreement. A deal by this summer was never on the cards, even without the distraction of coronavirus; Barnier needs to convince EU governments he has forced the UK to give ground.

There will be more ups and downs, missed deadlines, threats of no deal, the “ramping up” of preparations for one and wishful thinking in Eurosceptic newspapers that they will be needed.

Negotiations will go down to the wire, because they always do, but there’ll almost certainly be a deal. Johnson, who built his career in journalism and politics on declaring war on the EU, now finds it in his interests to sue for peace.

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