- Both sides need to reach new trade arrangements and rectify them in their respective parliaments before the end of the year.
- Failure to achieve that could lead to a no-deal scenario — higher costs and barriers for exporters on both sides.
- The major sticking points remain over fishing, competition policy and governance of any future deal.
LONDON — The U.K. and the EU are in the "last leg of negotiations" over a post-Brexit trade agreement, according to Britain's foreign minister, with only a few weeks left to approve any potential deal.
The U.K. stopped being a member of the EU in January, but it agreed to keep following European rules until the end of 2020 so both sides could formulate new trade arrangements. However, this has proven to be a difficult task with talks stuck over the same three issues since the spring.
"I do think this is a very significant week, the last real major week," Dominic Raab, told the BBC on Sunday.
Both sides need to reach new trade arrangements and rectify them in their respective parliaments before the end of the year. Failure to achieve that could lead to a no-deal scenario — higher costs and barriers for exporters on both sides.
According to Raab, a breakthrough depends on overcoming differences over a "fairly narrow" number of issues. The major sticking points remain over fishing, competition policy and governance of any future deal. They have different views on how much access European fishing crews should have on U.K. waters, and on what sort of market competition rules should be applied to ensure Britain's departure does not jeopardize the EU's single market.
Speaking on Monday morning, Irish Foreign Minister Simon Coveney said that fishing is a more difficult issue than competition rules.
Without an agreement on fishing, "the whole thing could fall on the back of it," he said, stressing the importance of this subject to the entire negotiating process.
"The quotas and the access — all of that is determined in Brussels and of course the U.K. government has said we have left the EU … and we want to able to regain control over our waters," Georgina Wright, senior researcher at Institute for Government, told CNBC's "Squawk Box Europe" on Monday.
She added that "if there is going to be a deal, it has to happen very soon and that's because businesses need to prepare, so fishermen on either side need to know what's what and what's going to happen on the first of January."
The EU's chief negotiator, Michel Barnier, told journalists in London on Sunday: "Let us work, let us work," according to Sky News in reference to the likelihood of a deal.
Before arriving in London for more talks, Barnier said Friday that the "same significant divergences persist."
Earlier last week, European Commission President Ursula von der Leyen said that "these are decisive days" in the process, but she could not say whether there would definitely be a deal. The message in London since then has been more positive.
David Frost, the U.K.'s chief negotiator, said Friday that "it is late, but a deal is still possible."
A European official, who didn't want to be named due to the sensitive nature of the talks, told CNBC over the weekend that a breakthrough is dependent on a phone call between U.K. Prime Minister Boris Johnson and von der Leyen.
However, there aren't yet any plans for a call between the two.
In the meantime, businesses on both sides wait for an end to the process. The British Chambers of Commerce, a trade body for businesses, warned in late September of "major gaps" in government guidance for firms if no deal is reached.
As a member of the EU for more than 40 years, many U.K. exporters rely on raw materials or clients based in Europe and vice-versa.
Carmakers are reportedly stockpiling cars and parts to avoid being hit with tariffs in case the U.K. and the EU do not reach an agreement. Brands such as Volkswagen and Honda have large manufacturing plants in the U.K. and then export them to the rest of the EU.