Theresa May hit back at the European Union for flatly rejecting her Brexit plans and demanded the bloc treat the UK with respect, as the stalemate in negotiations deepened.
The prime minister revived a warning that no deal is better than a bad deal on Friday, a day after EU leaders bluntly told her that her Brexit divorce blueprint won’t work. In a statement in London, May told them it was “not acceptable to simply reject” her plan.
The pound fell as much as 1.6% against the dollar, the most on a closing basis since June last year.
Earlier this week, May was left looking isolated after leaders told her to re-work her plans, and set her a deadline of next month to come back with new ideas. British officials had been hoping for warmer words from them at a summit in Salzburg, Austria to bolster the premier as she prepares for what is likely to be a contentious Conservative Party conference in a fortnight.
“Throughout this process I have treated the EU with nothing but respect. The UK expects the same. A good relationship at the end of this process depends on it,” May said in a televised statement in her Downing Street residence.
“At this late stage in the negotiations, it’s not acceptable to simply reject the other side’s proposals without a detailed explanation and counter proposals.”
In response, UK businesses warned both sides to end their “posturing” and finish the job of getting a deal.
“Businesses across the UK want the negotiators to knuckle down and deliver tangible results that enable them to plan for the future,” said Adam Marshall, director general of the British Chambers of Commerce, in an emailed statement.
The prime minister said in March that she wouldn’t be "buffeted" by calls to walk away from talks, but as the tone of negotiations deteriorated on Thursday, she hinted she might have changed her mind. She said the UK would continue to prepare for a no deal exit.
Britain is due to leave the bloc in March next year, with or without a deal. If there’s no divorce agreement, there will be no transition - a two-year grace period designed to prevent the country and its businesses tumbling into a legal limbo.
On Friday, May appeared to offer further reassurance to EU citizens living in Britain, promising that even in the event of a no-deal Brexit, their rights would be protected.
May is going into a politically perilous period as her party prepares for its conference. She’s facing increasing calls to dump her vision of what the future trading relationship should be, and speculation is rife that some in her party will try to oust her. She doesn’t have a majority in Parliament, and lawmakers are lining up to threaten that if she doesn’t change tack, they will vote against the final deal she brings back.
In Salzburg, the message from EU leaders instead handed ammunition to May’s critics at home. They met over lunch on Thursday without her to discuss Brexit and European Council President Donald Tusk subsequently briefed her in what May described as a "frank" conversation.
Tory Brexiteer Jacob Rees-Mogg said the summit showed the EU “is not acting in good faith” and welcomed May’s “strong and forthright” words. But he warned that her Brexit plan won’t work for either the U.K. or EU.
May says that her plan, known as the Chequers proposal, is the only viable option as it’s the only blueprint that can avoid a hard border emerging on Ireland, protect businesses with intricate European supply chains, and deliver on the referendum result. May had a chance to sell her plan over dinner on Wednesday but leaders were unimpressed, with some saying she had told them nothing new.
French President Emmanuel Macron took the most severe tone, saying Brexit must exact a "cost" and urged the 27 other leaders to stand firm.
The EU says May is trying to cherry-pick, and that it would risk unraveling the single market - the system of rules and standards that allows trade, services and people to move freely across borders.
One European government official said May’s statement on Friday was clearly aimed at the domestic audience and the European Commission knew it was coming. “The process will move forward” after the Tory conference, the official said. “First we need to know she’ll stay.”
Still, the market may be too pessimistic about the outlook for Brexit talks, according to Pimco’s Chief Investment Officer of global fixed income Andrew Balls. “Our expectation is there will be a deal in November and it will not be that dramatic,” he told Bloomberg TV on Friday ahead of May’s statement.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER