Warning on trade as UK ministers prepare to offer more cash

The EU's chief Brexit negotiator has warned the UK's hopes of a free trade agreement could be dashed if it tries to abandon the 'European model' and transform itself into a low-tax, low-regulation economy.

The European Union's top Brexit negotiator says that is up to the United Kingdom to offer solutions on how to settle its border with Ireland and insisted it was not up to the EU to offer compromises. Picture: AP Photo/Virginia Mayo

The threat from Michel Barnier came as Theresa May chaired a private meeting of senior ministers in an attempt to break the deadlock in Brexit talks by increasing Britain’s offer on its “divorce bill”.

Downing Street did not comment on reports that the Cabinet’s exit and trade (strategy and negotiations) sub-committee last night approved a further £20 billion in payments to the EU, bringing the total offer to around £38bn.

After the gathering, a Downing Street source said: “It remains our position that nothing’s agreed until everything’s agreed in negotiations with the EU. As the Prime Minister said this morning, the UK and the EU should step forward together.”

European Council president Donald Tusk has set a December deadline for breakthroughs on the divorce bill and the Irish border if the remaining 27 EU states – the EU27 – are to conclude that “sufficient progress” has been made to move on to the second phase of negotiations, dealing trade.

German foreign minister Michael Roth said the EU27 need “clarity” from Britain on its divorce bill, warning: “I currently see no chance of the European Council in December really sending out the signal that these talks can get going.”

Speaking during a visit to Birmingham on Monday morning, Mrs May repeated that the UK would “honour our commitments” and “no other European Union country needs fear that they will have to receive less or pay in more”.

Meanwhile, Mr Barnier said the EU wanted to strike an “ambitious” deal with the UK, but warned that national parliaments and the European Parliament could refuse to ratify it unless Britain commits to a “level playing field” on issues like fair competition, food safety, social protections and environmental standards.

Mr Barnier insisted that Britain must come forward with proposals to avoid a hard border in Ireland, and suggested this could involve separate regulatory regimes for Northern Ireland and the mainland, moving the border with the single market to the Irish Sea.

He confirmed that UK-based financial services firms would lose the “passport” which allows them to operate in the EU market after Brexit. Mr Barnier borrowed Mrs May’s phrase, saying: “Brexit means Brexit, everywhere.”