24 July 2020

How likely is a no-deal Brexit?

Access to British and European waters could yet be the issue that prevents a EU-UK trade deal.

BRUSSELS, BELGIUM - JUNE 05: Michel Barnier, Chief Negotiator for Europe, attends a press conference regarding the fourth round of Brexit negotiations on June 5, 2020 in Brussels, Belgium. This week's discussions which were held online ahead of a summit that is expected take place later this month, involving Prime Minister Boris Johnson and European Commission President, Ursula von der Leyen. The UK has until the end of June to ask for the an extension to the current transition period, during which the country stays in the single market and customs union but Mr Johnson has ruled this out. (Photo by Daina Le Lardic - Pool/Getty Images)

Is the United Kingdom heading for a no-deal exit on 31 December? The Brexit talks enter their summer break with both sides saying that gaps remain between the two parties. Major concerns endure over state aid and how, or even if, to ensure a level-playing field between the EU and UK after the transition period ends, while the two sides are divided over fishing.

But both sides have made important concessions. The EU’s Brexit negotiator Michel Barnier has indicated that the trade agreement’s enforcement mechanism could be something other than the European Court of Justice, while his UK counterpart David Frost has signalled a willingness on the British side to abandon hope of securing a series of treaties covering different areas rather than one all-encompassing agreement.

The latter is especially important for two reasons. The European Commission dislikes its complicated and fraught institutional relationship with Switzerland, which comprises more than 100 agreements across various topics. The reality of British politics since the 1950s has been that one of the parties has tended to favour a closer relationship with Europe and the other a more distant one, and there is an appetite among European diplomats for a trade agreement that can stretch and flex to meet changing political opinion here in the UK: one able to bring a pro-European government closer to the EU, and a Eurosceptic one further away, without ripping up the agreement and starting again.

But more significantly, if the same treaty covers everything, that makes enforcement of treaty breaches on the level-playing field easier – because in the event of one side or another breaking their obligations, they could face restrictions in market access and co-operation across a much wider range of policy areas and sectors.

You can see the outlines for a deal in which the UK secures the politically important prize of freedom from the European Court of Justice, and the EU 27 secure the vital policy win of an enforcement mechanism with real teeth.

But what about fishing? Yes, the economic benefits to either side are pretty small, but it is a politically explosive topic, and one where it is much harder to see a middle ground.

Don’t forget that the economic difference between a no-deal Brexit and the one envisaged by the British government is not particularly large – so the political imperative to find a middle way on fishing is not as large as it might otherwise be. Access to British and European waters could yet be the issue that prevents a EU-UK trade deal.