LONDON (Reuters) – Prime Minister Boris Johnson said on Friday it was now time to prepare for a no-trade deal Brexit unless the European Union fundamentally changed course, bluntly telling Brussels that there was no point in continuing the negotiations.
A tumultuous “no deal” finale to the United Kingdom’s five-year Brexit crisis would sow chaos through the delicate supply chains that stretch across Britain, the EU and beyond – just as the economic hit from the coronavirus pandemic worsens.
At what was supposed to be the “Brexit summit” on Thursday, the EU delivered an ultimatum: it said it was concerned by a lack of progress and called on London to yield on key sticking points or see a rupture of ties with the bloc from Jan. 1.
“I have concluded that we should get ready for January 1 with arrangements that are more like Australia’s based on simple principles of global free trade,” Johnson said.
“With high hearts and with complete confidence, we will prepare to embrace the alternative and we will prosper mightily as an independent free trading nation, controlling and setting our own laws,” he added.
EU heads of government, concluding a summit in Brussels on Friday, rushed to say that they wanted a trade deal and that talks would continue, though not at any price.
German Chancellor Angela Merkel, Europe’s most powerful leader, said it would be best to get a deal and that compromises on both sides would be needed. French President Emmanuel Macron said Britain needed a Brexit deal more than the 27-nation EU.
Johnson’s spokesman said talks were now over and there was no point in the EU’s chief negotiator Michel Barnier coming to London next week barring a change in approach. [L8N2H747X]
However, Barnier and his British counterpart David Frost had agreed to speak again early next week, Downing Street said.
The pound oscillated to Brexit news, dropping a cent against the U.S. dollar on Johnson’s remarks but then rising before falling again on his spokesman’s comments.
After demanding that London make further concessions for a deal, EU diplomats and officials cast Johnson’s move as little more than rhetoric, portraying it as a frantic bid to secure concessions before a last-minute deal was done.
Dutch Prime Minister Mark Rutte said he thought Johnson had signalled that London was ready to compromise.
While U.S. investment banks agree that a deal is the most likely ultimate outcome, the consensus was wrong on the 2016 Brexit referendum: when Britons voted by 52-48% to leave, markets tumbled and European leaders were shocked.
Asked if he was walking away from talks, Johnson said: “If there’s a fundamental change of approach, of course we are always willing to listen, but it didn’t seem particularly encouraging from the summit in Brussels.
“Unless there is a fundamental change of approach, we’re going to go for the Australia solution. And we should do it with great confidence,” he said.
A so-called “Australia deal” means that the United Kingdom would trade on World Trade Organization terms: as a country without an EU trade agreement, like Australia, tariffs would be imposed under WTO rules, likely causing significant price rises.
European Commission President Ursula von der Leyen said she was keen for a deal, though Macron was more downbeat.
“The state of our talks is not that we are stumbling over the issue of fishing, which is the British’s tactical argument, but we’re stumbling over everything. Everything,” Macron said.
“The remaining 27 leaders of the EU, who chose to remain in the EU, are not there simply to make the British prime minister happy,” he added.
Merkel called for Britain to compromise. “This of course means that we, too, will need to make compromises,” she said.
Britain formally left the EU on Jan. 31, but the two sides have been haggling over a deal that would govern trade in everything from car parts to medicines when informal membership known as the transition period ends Dec. 31.
Johnson had repeatedly asserted that his preference is for a deal but that Britain could make a success of a no-deal scenario, which would throw $900 billion in annual bilateral trade into uncertainty and could snarl the border, turning the southeastern county of Kent into a vast truck park.
The EU’s 27 members, whose combined $18.4 trillion economy dwarfs the United Kingdom’s $3 trillion economy, says progress had been made over recent months though compromise is needed.
Main sticking points remain fishing and the so-called level playing field – rules aimed at stopping a country gaining a competitive advantage over a trade partner.
(Additional reporting by Michael Holden, Elizabeth Piper and Kate Holton in London, Gabriela Baczynska and John Chalmers in Brussels, Kirsti Knolle in Berlin and Michel Rose in Paris; Writing by Guy Faulconbridge; Editing by Mark Heinrich and Toby Chopra)