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Analysis

EU will wring more billions from UK before talks move on

by Hugo Dixon | 12.10.2017

If Theresa May is to break the deadlock in the Brexit talks, she’ll have to double or treble the money she’s already effectively promised the EU.

That’s the main takeaway from today’s press conference at the end of the fifth round of negotiations. Michel Barnier, the EU commission’s chief negotiator, said an impasse had been reached on money. This was one of the three issues on which the EU has said there needs to be sufficient progress before it’s willing to talk about a new trade deal with Britain.

David Davis, the Brexit secretary, said he was hopeful that next week’s summit of EU leaders would give the green light for the negotiations to move on from settling the divorce to discussing the future deal. But, to borrow a Boris Johnson phrase, he may as well “go whistle”.

The EU is not in any mood to offer concessions, and because it’s in a stronger position than we are, Barnier made it clear he doesn’t see any need to offer any either.

This is the exact opposite of what Brexiters told us. They said the EU needed us more than we needed it. The Germans, in particular, would be falling over themselves to do a deal because they would be desperate to sell us BMWs.

This was another Brexiter lie. The EU is five times bigger than us, so it can more easily absorb the hit to trade: 12% of our economy depends on exports to the EU; only 3% of its economy is accounted for by exports to us. What’s more, Germany is the leading hardliner on their side, not the softie.

We are the desperate ones. Business investment has stalled. Companies are starting to shift operations across the Channel so they don’t lose access to the EU’s single market. Talented EU citizens are fleeing the country.

At the moment, the damage is only middling. But each month that goes by without a deal, firms and citizens will increasingly vote with their feet. That’s why May is so keen to talk about a two-year transitional deal that would kick in when we quit the EU. She doesn’t want the economy to fall off a cliff.

But our hapless government has still wasted two more months in talks that only have another year to run. The best we can hope for is that the EU will agree to move on to discussing the future relationship when leaders meet in December. What’s more, it will only do that if we agree to make more concessions.

The big one will be money. In her Florence speech, May effectively promised £18bn to make sure the other EU countries aren’t out of pocket during the transition she’s hoping to get. She also said we would honour our past commitments. That could add another £36bn to our divorce bill, taking the total to £54bn, if we go with what the EU is demanding. Even if we split the difference, it would be another £18bn.

The EU isn’t asking for a precise sum of money now. But it wants to agree the methodology. The negotiations are deadlocked because we won’t agree that.

The prime minister is stuck between a rock and a hard place. If she gives into the EU’s demands, Brexit hardliners in her party will scream blue murder. If she breaks off talks and carries out her threat to crash out of the EU with no deal, businesses will shriek in horror. But wasting month after month merely leads to death by a thousand cuts. What a shambles.

This article was published simultaneously by The Guardian.

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2 Responses to “EU will wring more billions from UK before talks move on”

  • yes and don’t forget after these negotiations were going to be launching a Global Britain where as Dr Victoria Bateman University of Cambridge has argued ; ‘Britain accounts for only 2.5 percent of global trade in goods and services compared with 16.3 percent for the EU. While the EU accounts for 14 percent of global imported goods and 20 percent of global imported services, the equivalent figures for the U.K. are just 2.2 percent and 2.9 percent. Britain has much less to offer foreign countries in return for them giving British firms tariff-free access to their own markets.’ and moreover ‘the difficulty the U.K. will encounter trying to negotiate eight separate bilateral trade agreements to cover the majority — 80 percent — of its present trade, and another 150 to cover all of its existing trade.’ https://www.bloomberg.com/view/articles/2016-10-17/six-reasons-to-be-wary-of-brexit-optimism

  • Unless there is a realistic plan a two year delay will simply mean that companies and individuals can schedule their departure in a more leisurely way. i we are going to leave in 2 1/2 years nobody is going to make long term commitments or investments.

    May needs to put on her flip flops and u turn us right back into the EU where we belong. Spend the brexit money on rescuing the NHS and building some much needed social housing, for example.

    PS Ban Lord Lawson from the country and keep him away from the tv and newspapers. Mr Bad News entitled privileged person is what he is. He has only his interests at heart.