In Brexit talks impasse, both sides consider life without deal

British and European Union negotiators meet in London next week for their eighth round of talks on their future relationship but neither side is expecting progress. Michel Barnier warned this week that there would be no deal unless Britain moved from its current positions on fisheries and state aid.

On Friday evening, Britain's chief negotiator David Frost dismissed Barnier's claim and blamed the Europeans for the impasse.

“We have scheduled lots of time for discussions, as we should at this point in the talks. However, the EU still insists we change our positions on state aid and fisheries if there are to be substantive textual discussions on anything else. From the very beginning we have been clear about what we can accept in these areas, which are fundamental to our status as an independent country. We will negotiate constructively but the EU’s stance may, realistically, limit the progress we can make next week,” he said.

Subsidy regime

Boris Johnson sounded nonchalant on Friday about the prospect of no deal, predicting that Britain would "prosper mightily" without one. Earlier, the Spectator's political editor, James Forsyth, reported that the prime minister would prefer to have no deal than to back down on his refusal to offer guarantees on state aid.

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The EU has dropped its demand that Britain should continue to follow European rules on state aid but it is adamant that Britain’s subsidy regime must be part of any agreement.

The Europeans want to see the substance of the state aid regime, they want to know what kind of domestic enforcement Britain will put in place and they want to discuss a dispute resolution mechanism. Britain insists that such details have no place in any agreement with the EU but there is no appetite in European capitals to allow British businesses to undercut EU rivals with the help of unfair state subsidies.

Science and steel

They are concerned about how Johnson’s government, which aspires to make Britain a world leader in science and technology, will subsidise sectors like artificial intelligence and renewable energy. But they also fear the impact of state aid on industries like steel.

As the likelihood of no deal appears to rise, both sides are considering the future without one and whether negotiations might resume next year after Britain crashes out. Some in Johnson’s government believe a deal could be struck next year without offering state aid commitments but the calculation in European capitals is that a few months of tariffs and border delays could make Britain an easier partner to negotiate with next year.