- A senior U.K. government official told the BBC on Friday morning that the chances of reaching an agreement were "receding."
- Meanwhile, on the European side, Council President Charles Michel said, "We want a deal … but we are ready for all the possible options."
- In addition to the ongoing negotiations, the U.K. government also has to deal with opposition at home over legislation that would override previous commitments with the EU.
LONDON — The U.K. and European Union have reached a critical point in their Brexit negotiations, as the deadline for a trade deal nears but an agreement remains elusive.
The U.K. left the European Union in January but agreed to continue following EU trade rules until the end of the year so both sides could come to a new trade agreement. However, their negotiations have dragged on for months, and without a clear end in sight, there are growing concerns the talks could collapse without a deal.
In this scenario, exporters on both sides would face higher costs and barriers in their day-to-day business.
A senior U.K. government official told the BBC on Friday morning that the chances of reaching an agreement were "receding," after EU negotiators brought "new elements" to the table. The U.K. government told CNBC on Friday that the talks were ongoing, but did not comment on whether a breakthrough looked less likely.
Meanwhile, on the European side, Council President Charles Michel said, "We want a deal … but we are ready for all the possible options."
Speaking in Brussels on Friday, he added: "I respect the full British sovereignty, but it will be the British choice, the choice of the British government what do they want for their own future, which kind of standards do they want to follow and the real question is: which political, economic, social project do they want for their own future?"
One of the main stumbling blocks has been over what sort of regulations the U.K. will adopt once the transition period is over. The issue is particularly important for the EU, which is worried about being undercut if the U.K. reduces food standards and similar regulations significantly.
But their outstanding differences go beyond that. The EU also wants to ensure its fishermen and women can keep working in U.K. waters — but Prime Minister Boris Johnson argues that as an independent nation, it will prioritize U.K. boats. Fishing represents a tiny portion of the U.K. economy, but the industry was among the most vocal supporters of leaving the EU.
This is also a vital political issue for the French government: Prime Minister Jean Castex visited fishermen and women on Thursday and said they shall not become the losers of Brexit.
Speaking on Friday morning, France's Europe minister, Clement Beaune, said, "I want to tell our fishermen, our producers, and our citizens … that we will not accept a deal with bad terms."
France, or any EU country, could ultimately veto a trade agreement with the U.K. if it disagrees with any of the conditions.
The European Parliament, as well as U.K. lawmakers, have to greenlight any potential trade deal before the end of December to avoid harsher exporting conditions from January.
"Ultimately for a deal to come together, we remain of the view that Johnson will probably need to connect with French President Emmanuel Macron and European Commission President Ursula von der Leyen," Mujtaba Rahman, managing director at consultancy firm Eurasia Group, said Thursday.
For now, there are no high-level political meetings scheduled.
In addition to the ongoing negotiations, the U.K. government also has to deal with opposition at home over legislation that would override previous commitments with the EU.
The U.K.'s House of Lords, its upper parliamentary chamber, have said no to new laws proposed by Johnson's team that would reverse parts of its exit deal with the EU. Europe has said that it will not sign a trade deal while previous commitments are not honored.
Sterling traded mostly flat on Friday morning against the euro and U.S. dollar, after seesawing in recent days on speculation over whether a deal will be reached.