UK uses Brexit cliff-edge to demand EU trade deal

Credit: Reuters Studio
Published on December 17, 2019 - Duration: 01:52s

UK uses Brexit cliff-edge to demand EU trade deal

Sterling tanked after it emerged that British Prime Minister Boris Johnson will outlaw extending a Brexit transition period beyond the end of 2020, rekindling fears of a hard exit from the EU.

David Doyle reports.

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UK uses Brexit cliff-edge to demand EU trade deal

Boris Johnson is going to use British law to demand a comprehensive free trade deal with the European Union by the end of 2020, in a move that's reignited fears over a hard Brexit and sent sterling tumbling.

After the UK leaves the EU on January 31 it will enter a transition period in which a deal encompassing everything from financial services to fishing will be negotiated.

The British prime minister promised in his election campaign to get that done by the end of next year and he's now going to use the significant majority he won to outlaw any extension of the transition period beyond 2020.

This cuts the amount of time he could have for negotiations from nearly three years to around ten months.

EU leaders have said they will not seal a deal without solid provisions to guarantee fair competition and have cautioned that more time will be needed to hammer out an agreement between the world's biggest trading bloc and fifth largest economy.

That's partly because of challenging issues that need to be settled.

The UK will be under pressure to loosen rules on agricultural and food standards in order to strike a bilateral trade deal with the United States - but this would be crossing a red line for the EU, which would restrict access to its market to protect its own producers.

Fishing is another thorny issue, as EU countries will no longer be able to operate in British waters as they do now.

If a deal is not agreed by the end of the year then trade would be on World Trade Organization terms - which are more burdensome for businesses.

The pound tanked by more than 1% against the dollar and the euro in early European trading on Tuesday (December 17) while shares in UK firms more exposed to the domestic economy also fell.

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