‘EU will hurt itself to teach Britain a lesson’

Leaked memo reveals City representative believes there is just 1pc chance of October Brexit trade talks

BRUSSELS shows no interest in finding “long-term solutions” to Brexit and could ignore the interests of European Union business, a leaked memo to financial leaders has warned.

There is just a “one per cent” chance of the EU agreeing to start discussing a trade deal in October as the UK wants, according to a source quoted in the note. There is also no appetite for creating a “bespoke” transition deal that will allow Britain to retain the benefits of EU membership for years after formally leaving, it is warned.

The “sobering” analysis is contained in a 1,200 word memo from Jeremy Browne, the special representative for the City of London to the EU, which has been leaked to this newspaper.

It was circulated to around 350 executives at financial firms as Mr Browne holds a series of meetings in Brussels tomorrow and Tuesday.

The note paints a gloomy picture of the level of engagement in Brussels on Brexit, despite a series of position pa- pers being published by Britain over the summer. It also contains a clear warning that even if EU businesses want to keep tariffs low after Brexit, the politicians leading negotiations may not listen.

The memo is significant as it shapes how the country’s most senior financial figures approach Brexit amid fears that the EU wants to lure banks away from the City.

Mr Browne is a former Liberal Democrat MP who served as a government minister both in the Foreign Office and Home Office during the coalition years.

In his memo he writes: “It is hard not to feel a little weary and fatalistic after doing the rounds in Brussels. Such a virtue is made of intransigence and ensuring that Britain learns lessons from the EU. The restricted mandate means little energy is expended on the imaginative search for long-term solutions. People can look most contented when they have declared a problem to be intractable.

“Of course the EU machinery is going to make a show of ‘hanging tough’ at this stage. Even so, it is still sobering for anyone who hopes for a mutually beneficial post-Brexit partnership between the EU and Britain.”

Mr Browne is also pessimistic of the chances Britain has of discussing future trade talks with the EU in the autumn. Britain wants to start talking about a post-Brexit trade deal from October, but the EU is refusing to until progress is made on what Britain will pay when it leaves.

Mr Browne wrote: “The result is that nobody seems to think an agreement is likely at the October Council, that ‘sufficient progress’ has been made on stage one of the negotiations.

“A ‘one per cent chance’, I was told at one meeting. That seems excessively bleak, but it is certainly widely factored in to calculations that the timetable will be pushed backwards: ‘November is the new October.’”

There is also a warning that the EU could put political interests – keeping the bloc united and strong – ahead of the economic interests of its businesses. “It was stated again that the voice of businesses in the EU will not sway the political decision makers,” Mr Browne writes. “The big German corporates, for example, will not issue tough warnings to their politicians.

“It is, I think, underestimated in Britain how deeply corporate Europe buys into the EU orthodoxy. They are not boat-rockers by nature, but they also attach great importance to protecting the integrity of the single market, and going further still, to deepening Eurozone integration.

“Trade with Britain is, of course, significant, but there is little obvious sign of ranks being broken.”