British businesses and some European Union (EU) leaders have urged UK prime minister Boris Johnson to strike a last-minute trade deal with the EU.
Johnson said Friday it was “very, very likely” that negotiations on a new economic relationship model (to take effect January 1) will fail.
Johnson and European Commission President Ursula von der Leyen have set a Sunday deadline to decide whether to keep talking or prepare for a no-deal scenario.
No deal ‘very, very likely’
Johnson said “there is a way to go – we’re hopeful that progress can be made” between the two negotiating teams in Brussels.
“But I’ve got to tell that from where I stand now, … it is looking very, very likely” that the UK will end up trading with the bloc on World Trade Organization (WTO) terms — with all the tariffs and barriers that would bring.
A no-deal split would bring overnight tariffs and other barriers that would hurt both sides, although most economists think the smaller British economy would take a greater hit because the UK does almost half of its trade with the bloc.
Preparing for the worst
Ahead of the year-end deadline, there were already long queues of trucks on both sides of the English Channel as UK companies stock-up in case of disruption in January.
Britain’s Office for Budget Responsibility says a no-deal Brexit would slash 2% off UK gross domestic product (GDP) in 2021, on top of the damage done by the coronavirus pandemic.
Supermarkets say food prices will rise, with 85% of foods imported from the EU expected to face tariffs of more than 5%, according to the British Retail Consortium.
Britain left the EU on January 31 but has continued to follow the bloc’s rules during a transition period that lasts until the end of the year.
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While both sides want a deal on the terms of a new relationship, they have fundamentally different views of what it entails.
The EU fears the UK will slash social and environmental standards and pump state money into British industries, becoming a low-regulation economic rival on the bloc’s doorstep and is demanding strict “level playing field” guarantees in exchange for access to its markets.
London claims the EU is trying to bind Britain to the bloc’s rules and regulations indefinitely, rather than treating it as an independent nation.