Brexit Deadlock Deepens as Hopes Fade for Breakthrough During Crucial Week

The U.K. and the European Union are on course to miss this week’s key milestone on the road to a Brexit deal after talks broke up in stalemate on Sunday, people familiar with the matter said.

A weekend of intense negotiations — including a surprise dash by Brexit Secretary Dominic Raab to meet his EU counterpart Michel Barnier in Brussels — failed to break the deadlock.

There will be no further attempt to resolve the impasse before EU leaders gather in the Belgian capital on Wednesday for the summit they’d hoped to use to finalize the divorce.

Officials on both sides have now all-but given up on a breakthrough this week, and are increasingly concerned that time is running out to get an agreement before the U.K.’s exit in March, the people said, speaking on condition of anonymity because the talks are confidential.

“Despite intense efforts, some key issues are still open,” Barnier said on Twitter after his hour-long meeting with Raab. For his part, the Brexit secretary left Brussels and traveled back to London without making any comment.

The weekend was meant to be a chance to crack the thorniest issue in talks — what to do with the Irish border — so that leaders meeting for a summit on Wednesday could declare progress and signal that a final deal could be signed in mid-November.

That timetable — which markets have started to price in — has been thrown off and there’s likely to be more talk of how to prepare for a chaotic and acrimonious no-deal split. The pound fell early on Monday.

A key meeting of EU governments scheduled for Monday was canceled and negotiations will likely to be paused for some time, according to EU diplomats.

The major sticking point remains how to avoid the need for a hard customs border at the land frontier between Northern Ireland and the Republic of Ireland after Brexit. One proposal is to keep the U.K. inside the EU’s customs union on a temporary basis, which would mean no new checks on goods passing from Northern Ireland to Ireland would be needed.

But pro-Brexit ministers in May’s Tory party — including Raab — are determined to make sure any such arrangement has a strict end date, to avoid Britain being trapped inside EU rules and tariffs indefinitely. They want the U.K. to be free to strike trade deals around the world, something that is impossible for countries in the EU customs union.

Despite the pessimism, some observers believe a showdown moment may simply be a necessary piece of theatrics that will act as a precursor to a deal.

The September EU summit in Salzburg ended in a diplomatic disaster for Prime Minister Theresa May, yet she used the occasion to her advantage. A breakdown in relations in October could potentially help the premier at home by showing she had stood her ground.

Some EU diplomats speculate that she needs to have a fight in order to get the deal she does eventually deliver through a divided British Parliament. May is probably going to have to count on opposition votes, and will need to present it as the only viable alternative to chaos.

Sabine Weyand, Barnier’s deputy, told ambassadors it was clear from Sunday’s talks that for domestic reasons the U.K. needed more time before it could make concessions, according to a diplomat in the meeting.

With just five months until the U.K. is due to leave the bloc, with or without a deal, businesses are increasingly anxious to see the terms of the divorce and to secure the 21-month transition period that they need to avoid the legal limbo of no-deal. Yet the two sides remain far apart on key points.

“There remain a number of unresolved issues relating to the backstop,” a British government spokesman said on Sunday. “The U.K. is still committed to making progress at the October European Council.”

The Irish backstop proposal has enraged at least two groups that May needs in order to get her deal through a Parliament where she has no majority. That’s reduced her room for maneuver.

At least one member of May’s Cabinet is considering resigning over her Brexit stance and former Brexit Secretary David Davis is rallying Brexit hardliners to rebel. Arlene Foster, the head of the Northern Irish party that props up her government, was quoted as saying she expects a no-deal exit because May’s proposals on the Irish border are unacceptable.

A Cabinet meeting on Tuesday is shaping up to be a showdown between May and those ministers most in favor of a clean break with the EU. “We need more time, but there isn’t much time left,” one British official said.