Boris Johnson’s hopes of a Brexit deal have been dealt a fresh blow as Brussels ruled out EU leaders intervening in the troubled negotiations at a summit this month. According to EU diplomats, both the EU’s chief negotiator, Michel Barnier, and Downing Street have lobbied for 27 heads of state and government to seize control of the talks given the current impasse. Despite the parlous state of the talks, the former Belgian prime minister Charles Michel, who now chairs the leaders’ meetings as president of the European council, has decided to focus on the bloc’s recovery from the coronavirus and relations with China at the summit on 25 September. EU sources said expectations were “extremely low” for the next round of negotiations, which start on Tuesday, after a disappointing meeting between Barnier and the UK’s negotiator David Frost in London this week. “From those discussions there is no basis to believe that there will be any progress at all next week,” said one EU source. “There was nothing new in what London was saying and there is no reason to think that this coming week will offer any progress.” The major obstacle to a deal remains the issue of the UK’s plans for its domestic subsidy regime from 1 January 2021 when the country leaves the EU’s single market and customs union. In a tweet on Friday, Frost acknowledged the low expectations for progress in the coming week. He tweeted: “We will negotiate constructively but the EU’s stance may, realistically, limit the progress we can make next week.”
Asked about growing concerns of a no deal exit, however, the prime minister insisted that the UK would “prosper mightily” even if it does not strike a trade deal with the EU. During a visit to Solihull, where he was inspecting a HS2 construction site, Johnson told reporters: “We’re ready for any eventuality, of course. But we must make sure that people understand that at the end of the year, whatever happens, we are using the EU. “We will get through this. It’s vital that our partners understand that the UK is going to do what we need to do. “If we need to have an Australia-style deal, an Australia-style solution, then that is what we will achieve and we will prosper mightily one way or the other. “They could be sensible and give us a Canada-style solution, which after all they’ve given Canada, and I very much hope they will, but we’re ready for either eventuality.” In the face of British opposition, the EU has moved from its opening position that EU rules on so-called state aid should be incorporated into UK law to ensure that neither side can unfairly prop up their major businesses. But EU officials said the bloc was unable to work on an alternative solution until Downing Street publishes its plans for controlling the level of subsidies. “The problem is that they said in January and February that they needed time for a democratic debate on this subject but that we still haven’t had a trace of what they are going to do,” said a diplomatic source. The UK’s negotiators have insisted domestic subsidy policy is irrelevant to a free trade deal and point out that the EU has leant on World Trade Organization provisions in previous deals.
In the EU’s trade deal with Canada there is no requirement for either side to seek approval for subsidies from the other but the issue of trade distortions can be an issue for consultation. EU sources said there was a “misjudgment on the British side if they think that this can be left to the last minute”. One source said: “We have not been told when the domestic subsidy regime will be published, but what happens when it lands late September and it fails to offers the EU side any assurances over the future? It will be too late.” A UK government spokesman said: “There is still a lot more work to do, but it remains our goal to reach an agreement and we’ll continue to work hard to do so. We need more realism from the EU and for them to show that they understand the fundamentals of our position as an independent and sovereign country.” The cabinet is said to be divided over whether to establish hard rules on state subsidies and an independent regulator or allow the government more leeway. “We cannot do anything until the UK decides what it wants,” said an EU official. The UK is due to leave the single market and customs union on 31 December 2020. A deal needs to be negotiated by the end of October or the first week of November to allow time for parliamentary ratification.