Months of talks between the estranged allies have narrowed gaps on issues from energy to welfare for 2021 when Britain’s transition period after leaving the bloc ends.
But the three most contentious areas have so far prevented a deal, with businesses and markets increasingly jittery as the year-end deadline nears for a deal between the world’s sixth biggest economy and its largest trading bloc.
“We have been making good progress but ‘good’ is not good enough,” an EU official said when asked if a deal was close.
“We cannot say we are close to an agreement.”
Predicting drama over Brexit at a leaders’ meeting in Brussels on Thursday, Goldman Sachs bank said a thin deal was still likely by early November.
The 27 EU heads of state are due to step up contingency plans for an abrupt split if no agreement emerges in time on trading with Britain without tariffs or quotas.
But, keen to avoid being blamed, the bloc would continue negotiations for as long as possible, a German government source said, adding: “The European Union will not be the ones getting up from the table.”
The EU says a deal must come in early November at the latest to allow time for ratification by its parliament and some national chambers. Britain’s junior business minister Nadhim Zahawi said London also could not wait much longer as it needed to tell businesses to prepare if talks fail.
In a call on Wednesday (14 October), senior EU officials pushed British Prime Minister Boris Johnson for progress.
Johnson says he will decide whether to continue talks after the EU summit. His negotiator David Frost will advise him to keep persevering, a source said.
With fisheries crucial to France, President Emmanuel Macron was expected to take a hard line on Thursday.
The EU has warned it will not leave the matter to last and that it could only be part of a wider deal together with issues like energy ties or financial services where London has a weaker bargaining position than on fishing rights.
The sides are also far apart on the so-called level playing field guarantees of fair competition. They cover social, labour and environment standards, as well as state aid.
If both sides follow the same rules, they can trade without any barriers. But Britain wants to be able to regulate its own corporate subsidies freely in the future, while the EU seeks to lock in joint principles.
Otherwise, the EU says Britain cannot have open access to the bloc’s cherished single market of 450 million people as it could offer its goods for sale on artificially low prices resulting from substandard production.
“It’s a bit like one of your children not wanting to eat their veggies,” an EU diplomat said of Britain’s reluctance to accept the bloc’s position.
“What do you do? Do you force it into their mouth or do you try to mix it up another way?”