July 23, 2018 / 9:56 AM / a month ago

Britain warns EU: we face 'Brexit no-deal by accident' unless you change course

BERLIN/LONDON (Reuters) - Britain called on European Union negotiators on Monday to urgently change their approach to Brexit or face the turmoil of a “no-deal by accident”.

With just over eight months left until Britain is due to leave the EU, there is little clarity about how trade will flow as Prime Minister Theresa May, who is grappling with a rebellion in her party, is still trying to strike a deal with the bloc.

May has stepped up planning for a so called “no-deal” Brexit that would see the world’s fifth largest economy crash out of the EU on March 29, 2019, a step that could spook financial markets and dislocate trade flows across Europe and beyond.

EU chief Brexit negotiator Michel Barnier said last week that May’s new Brexit proposals contained constructive elements, though he added that many questions remain.

In Berlin on his first overseas trip as British foreign minister since replacing Boris Johnson, who resigned over May’s new proposals, Jeremy Hunt delivered a caution to the most powerful European Union power.

“When it comes to Brexit there is now a very real risk of a Brexit no-deal by accident,” he told a news conference alongside his German counterpart Heiko Maas.

“I think that many people in the EU are thinking that they just have to wait long enough and Britain will blink. And that’s not going to happen,” Hunt said.

Under the current timetable, both London and Brussels hope to get a final Brexit deal in October to give enough time to ratify it by Brexit day next March, though few diplomats expect the deal to be struck until months later.

Speaking in the northern English city of Newcastle, May told factory workers that Britain was making sure it was ready for a no-deal Brexit but that she was working to get an agreement that the British parliament would support.

About 52 percent of Britain’s total $1.1 trillion trade in goods last year was with the EU and some investors have said such a chaotic scenario would seriously damage both the economies of Britain and the EU over the short term.

Supporters of Brexit admit there may be some short-term pain for Britain’s $2.9 trillion economy, but that long-term it will prosper when cut free from the EU which they cast as a failing German-dominated experiment in European integration.

DISORDERLY BREXIT?

Hunt, who campaigned ahead of the 2016 referendum to remain in the EU, said Britain and Germany shared a commitment to a rules-based international order and that only Russian President Vladimir Putin would rejoice at the turmoil of a “no-deal”.

He added that the lack of a deal, while damaging for Britain, would provoke a backlash among British voters against the EU.

“Without a real change in approach from the EU negotiators we do now face a real risk of no deal by accident and that would be incredibly challenging economically,” Hunt said.

Maas said Germany did not want a disorderly Brexit.

“We want an agreement. And we also know that for that we have to make steps toward each other,” he said, adding that the EU’s collective interests had to be defended.

Some international businesses have stepped up planning for a so-called “no deal” though they admit there is little clarity about what such a scenario would look like.

EU countries will suffer long-term damage equivalent to about 1.5 percent of annual economic output if Britain leaves the bloc without a free trade deal next year, the International Monetary Fund said on Thursday.

FILE PHOTO: Britain's Foreign Secretary Jeremy Hunt gives a press conference at the Royal Botanic Garden in Edinburgh, Scotland July 20, 2018. David Cheskin/Pool via Reuters

Writing by Thomas Escritt and Guy Faulconbridge; editing by Angus MacSwan

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