The UK and EU yesterday (13 December) agreed to extend the negotiations over the future trade relationship after a ‘useful call’ between Prime Minister Boris Johnson and European Commission president Ursula von der Leyen.
Sunday had been flagged as a firm deadline day for a decision on the deal, but both leaders have asked their negotiators to continue the talks and to see whether an agreement could still be reached.
They discussed the “major unresolved topics” in the negotiations, Politico reports.
Unacceptable deal
Negotiations have been ongoing since fears of a no-deal were encouraged by both sides throughout the second half of last week.
According to the BBC, the UK still views the EU’s offer of a deal as “unacceptable”, particularly regarding future regulatory alignment and fishing rights.
Although the two sides are “still far apart”, hopes of a deal are rising again according to the FT.
Christmas sitting for MPs
An EU official told the FT that a resolution is unlikely over the next couple of days.
No deadline has been set on the latest talks, but the transition period ends on 31 December, so a deal must be agreed to and ratified in respective parliaments by then.
British MPs have been put on notice to be ready to vote on legislation enacting the deal in the week before Christmas. The European parliament is also ready for an emergency sitting over the festive period.
Alternative mechanisms
A major sticking point for the UK is that the EU has proposed punitive tariffs as the mechanism for ensuring regulatory alignment once the UK has left the single market – a so-called “ratcheting clause”.
This has been described as a threat to sovereignty by Boris Johnson and UK negotiator David Frost.
According to the Times, alternative mechanisms are being discussed, including some form of independent arbitration for when the two parties diverge on standards and rules.
With both parties still “very far apart on these key issues,” Johnson said that the UK “can’t be locked into the EU’s regulatory orbit,” and that trading with the EU on World Trade Organization terms was still “the most likely thing now”.
'Super XO committee'
The PM is expected to host a “super XO” committee with cabinet ministers on preparations for no-deal this week, the Times reports.
The government will also conduct a cross-Whitehall exercise called Operation Capstone to test no-deal scenarios.
Businesses desperate for clarity
Continuing uncertainty – particularly over tariffs – is leaving businesses unable to fully prepare for new trading terms from the 1 January, according to business leaders in the FT.
CBI director general Tony Danker is calling for “grace periods” from both sides for businesses to adjust to the terms of deal or no-deal, warning that companies are currently having to plan for both in parallel.
Adam Marshall, director-general of the British Chambers of Commerce, said the run-up to 31 December had become a “very frustrating time for business as they anxiously wait for decisions about the terms of trade with the EU come January 1”.
The British Retail Consortium urged shoppers to refrain from panic buying ahead of the New Year and maintained that shops had plentiful supplies.