MOMENT OF TRUTH AS BREXIT TALKS GO INTO THE ‘TUNNEL’
▶ Negotiations to fast-track an agreement keep hopes of an orderly Brexit alive but October 31 deadline still looms
British officials faced a midnight deadline yesterday to conclude the main details of a deal to leave the EU after talks entered a final, intense phase before a summit this week.
The start of so-called “tunnel” negotiations to draw up a draft agreement triggered a rally in sterling as analysts reduced the risk of a no-deal Brexit. The currency was holding on to gains above $1.26 on foreign exchanges by late afternoon.
Concessions in the deal centred on a special customs arrangement for Northern Ireland. This would protect cross-border trade through a complex rebate arrangement on goods transported through a post-Brexit UK.
Officials involved in the discussions rated the chances of a breakthrough as much better than a week ago but said the text worked out on the basis of a UK proposal was still a work in progress. UK Prime Minister Boris Johnson postponed a Cabinet meeting until today but met senior colleagues to consult on the British concessions.
“This isn’t the time for optimism or pessimism,” Simon Coveney, the Irish foreign minister said after a briefing with Michel Barnier, the EU’s chief negotiator. “The negotiating teams have made progress but it’s been slow.”
Mr Coveney said that even if the talks make progress, there could be a second EU summit before the end of October to finalise any Brexit deal.
“It is of course possible to move beyond the summit and continue talks next week. That is feasible because the UK isn’t due to leave the EU until the end of the month,” he said. “From everybody’s perspective, if we could provide clarity at this leaders’ summit, that would be a welcome development.”
Mr Johnson said he had productive talks with President Emmanuel Macron of France, who has taken a hard line on restricting British access to EU markets after Brexit.
“The prime minister said that in advance of the EU Council [summit] UK officials would continue to work hard on securing a deal,” a Downing Street spokesman said.
Mr Barnier told EU ambassadors that the talks had been difficult and that all options, including another delay to the British departure, were still open. “Reaching an agreement is still possible. Obviously any agreement must work for everyone – the whole of the United Kingdom and the whole of the European Union,” he said. “A deal tonight; an extension; or a breakdown.”
Investment banks have been reassessing the risks of Brexit with J P Morgan telling its clients to pare back provisioning for a sterling downturn triggered by a no-deal departure. A note prepared by Goldman Sachs also predicted a last-minute breakthrough.
“Our economists think enough [British MPs] would likely be persuaded to vote in favour of this amended deal, and they maintain their baseline expectation of an orderly Brexit by the end of October,” the assessment read. “In addition to a sterling appreciation, our economists argue that in a ‘deal’ scenario, business investment would recover a substantial proportion of the losses incurred over the past three years.”
European ministers have concerns that the concessions on Northern Ireland could leave a hole in the single-market rules that underpin the EU’s economic model.
Stef Blok, the Dutch foreign minister, said the Irish border must not allow “unfair competition” from countries outside the EU.
“Of course the UK government has some steps but not enough to guarantee the integrity of the common market,” he said. “We hope the remaining steps will be set in the coming hours or days.”