Brexit poker begins: UK ramps up no-deal preparations

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Britain headed into Tuesday’s fresh round of Brexit trade talks with a warning to the European Union that it was ramping up preparations to leave without agreement as both sides bickered over rules governing nearly $1 trillion in commerce.

Adding to a sense of crisis, the British currency and stocks fell, while the Financial Times said the government’s legal department head quit in disagreement with Prime Minister Boris Johnson’s office.

Britain left the EU on Jan. 31 but talks on new trade terms have made little headway as the clock ticks down to an October deadline and then the end of the status-quo transition arrangement in late December.

As diplomats gauged whether Johnson was blustering or serious about allowing a tumultuous finale to the four-year saga, his chief negotiator said yet again that Britain was not afraid of a no-deal exit.

The prospect of a messy divorce between the EU’s $16 trillion and United Kingdom’s $3 trillion economies pushed sterling to two-week lows with traders betting there was more volatility to come.

“We need to see more realism from the EU about our status as an independent country,” said David Frost, Britain’s top Brexit negotiator. “If they can’t do that in the very limited time we have left then we will be trading on terms like those the EU has with Australia, and we are ramping up our preparations for the end of the year.”

Australia is negotiating a free trade deal with the EU to improve its market access, but for now largely trades with the bloc on World Trade Organization terms.

‘DISASTER FOR BRITAIN’?

The Financial Times said the government’s “very unhappy” legal head Jonathan Jones walked out in protest over a possible plan to undercut the Brexit Withdrawal Agreement signed in January in relation to the protocol for British-ruled Northern Ireland.

The EU warned Britain on Monday that its international reputation would be tarnished and there would be no trade deal if it tried to sink the treaty.

Britain said it was committed to the treaty but that it needed minor clarifications and a backup plan to support the 1998 Northern Ireland peace deal.

Irish Prime Minister Micheal Martin said Britain’s trade talks with the EU would be pointless if the withdrawal agreement it signed up to is not implemented in full.

“The withdrawal agreement is an international treaty and we expect the UK government to implement and to adhere to what was agreed. We trust them to do so or they would render the talks process null and void,” Martin told the Irish Examiner.

The latest round of negotiations in London are likely to be tough: Britain says the EU has failed to understand it is now independent – especially when it comes to fishing and state aid.

The EU, weary of wrangling, says it needs specifics from London and that Britain cannot make its own rules and have preferential access to its markets.

Without agreement, trade and financial ties between the world’s sixth largest economy and its biggest trading bloc would be thrown into disarray, causing havoc for markets and businesses.

“A disorderly Brexit would not be good for Europe, it would be a real disaster for Britain and its citizens,” German Finance Minister Olaf Scholz told Reuters.

Source – Reuters