Boris Johnson on Friday broke off trade talks with the EU, bringing to a crisis point months of negotiations and throwing down the gauntlet to Brussels to adopt “a fundamental change of approach”.
Downing Street told Michel Barnier, EU trade negotiator, not to come to London for further talks next week unless he was ready to make a new offer that respected the UK as “an independent country”.
The UK prime minister’s threat to end the transition period on January 1 without a trade deal was seen by some as a theatrical gesture, a necessary moment of “crisis” before both sides finally made concessions to reach a deal.
But it created alarm among British businesses, already facing grave difficulties because of coronavirus and now facing the prospect of tariffs on trade with the EU that would be crippling for some sectors.
Michael Gove, the UK’s Cabinet Office minister, has admitted that beef and lamb producers could face tariffs of between 40 per cent and 100 per cent, while carmakers would face export duties of 10 per cent.
Although Mr Johnson insisted Britain would “prosper mightily” under an “Australian-style” arrangement — Canberra has no trade deal with the EU but is trying to negotiate one — senior cabinet ministers want a deal.
Mr Gove and Rishi Sunak, chancellor, have both urged the prime minister to secure a deal and to settle disputes on fisheries — which account for 0.1 per cent of the British economy — and state aid policy.
At a European Council meeting in Brussels there were signs that EU leaders were also keen to get a deal over the line, with Mr Barnier saying he hoped to hold “intensified” talks to secure a deal within three weeks.
Angela Merkel, German chancellor, spoke of the need for compromise on both sides, while Emmanuel Macron, French president, accepted that fishermen in his country would have to accept that access to UK waters would not be “as ambitious” after Brexit.
Mr Macron said the EU was conscious that a deal “will require efforts, particularly from the UK”, adding that “it is the UK a lot more than us that needs an agreement”.
The question now is whether Brussels tries to make use of its perceived upper hand in the negotiation by playing for time and pushing talks closer to the “no deal” cliff edge on January 1.
To try to force the issue to a rapid conclusion, Number 10 was robust in its language. Mr Johnson’s spokesman said that trade talks were “over” after the European Council implied that all future concessions would have to come from the UK side.
Mr Johnson claimed the summit had left him convinced that the EU was not ready to offer the UK a “Canada-style” trade agreement, a reference to a preferential relationship that would minimise tariffs and smooth commercial ties.
In a dramatic televised clip, the UK prime minister said Britain would approach the prospect of leaving the EU single market on January 1 without a trade deal with “high hearts”.
He did not explicitly say he was walking away from talks, but said to the EU: “Only come to us if there is some fundamental change of approach.” He added that, in those circumstances, “of course we would be ready to listen”.
The pound fell 0.3 per cent against the euro after Mr Johnson’s statement at midday, in which he told businesses and travellers to prepare for a new relationship with the EU from January 1 with no trade deal in place — meaning tariffs and quotas on trade in goods and substantial regulatory hurdles to trade in services.
EU officials noted that, despite Mr Johnson’s threat to walk away, much of the future-relationship deal was politically settled, with the negotiations now focused on a core set of sticking points: fishing rights in British waters, level playing field conditions for business, and dispute-settlement arrangements for the trade deal.
In response to Mr Johnson’s comments, the UK’s car industry association warned that a no-deal scenario would have a “devastating impact” and called on both sides to keep talking to avoid “permanent damage”.
Sarah Hendry of the Country Land and Business Association said: “Many farmers are under the most enormous pressure. They fed the nation through lockdown and are on the cusp of readjusting their business for a new life outside the Common Agricultural Policy. Now many face the complete collapse of their market.
“If the EU imposes tariffs, many farmers will no longer have customers for their produce and their businesses could easily collapse.”
Asked by the Financial Times about the potentially serious impact of a no-deal outcome to Brexit trade talks on carmakers and farmers, Mr Johnson said they would adapt to an “Australian exit” and “do very well indeed”.