Michel Barnier has warned that Britain will inevitably face barriers to trade in both goods and services if it chooses to leave the customs union and single market, following a critical meeting in Downing street with Theresa May and David Davis.



The European Commission’s chief negotiator made the comments as a senior EU official told the Guardian that the clock was ticking on Brexit negotiations and warned that Britain’s proposal for a “customs partnership” after leaving the EU was unrealistic.

The two sides have also clashed over the question of an implementation period as officials made it clear that May’s demand for EU citizens arriving in Britain during transition to have reduced rights was not acceptable.

Speaking after a lunch meeting that focused heavily on transition but also touched on the future trading relationship, Barnier said: “The only thing I can say – without the customs union, outside the single market – barriers to trade and goods and services are unavoidable. The time has come to make a choice.”

Davis described the talks as “very constructive” and said that intensive negotiations would start on Tuesday and he was confident to have a political agreement by a meeting of European leaders in March.

The Guardian understands that the commission wants the UK to put forward a detailed submission within weeks on what it is seeking in a future trading relationship.



However, British negotiators have been urged not to waste time on demands that are incompatible with the rules of the EU.

For example, Barnier has made it clear that in order for Britain to benefit from the single market and customs union, during transition, then free movement must continue during that period.

That clashes with May’s suggestion that EU citizens arriving after March, 2019, will have reduced settlement rights.

The EU is also resistant to any suggestion that Britain could “cherry-pick” from the benefits of the single market without meeting all the obligations.

The meeting, which took place ahead of the next round of talks, came as Downing Street was forced to rule out any involvement in “a customs union” after leaving the bloc amid anger from Tory backbenchers.

After the meeting Barnier warned there was “not a minute to lose” as he promised to accelerate talks. He later tweeted:

Visiting European Banking Authority @EBA_News today.



Preparedness for #Brexit is key. All competent authorities and market operators have to prepare now. When the UK leaves the single market, the financial passport is gone. pic.twitter.com/owwN2RmKcv — Michel Barnier (@MichelBarnier) February 5, 2018

Jacob Rees Mogg, who leads an influential group of Conservative Brexiteers, even suggested Treasury officials had been “fiddling the figures” to try to make the case for remaining within the trading bloc.

In response, May said that the ability to negotiate trade deals with third countries after leaving the EU remained a red line for her government.

But her spokesman did point to two alternative arrangements put forward in a government paper last year. One suggested a “highly streamlined customs arrangement” in which the UK would leave the customs union but try to use technology to speed up border arrangements.

The second suggested a new “customs partnership” - and is increasingly being talked about by ministers ahead of two crunch meetings of May’s so-called “Brexit war cabinet” later this week.

Under such an arrangement, the UK would be free to negotiate trade deals with third countries, but would take the “unprecedented” approach of mirroring the EU’s requirements for imports at British borders.

However, a senior EU official said that they considered such an arrangement to be unworkable.

“The partnership option is unrealistic,” he said.

He also cast doubts on the idea that the EU would accept May’s suggestion that after Brexit Britain could continue to align with the EU by setting the same regulatory goals but achieving them through different means.

“The idea that the UK will unilaterally decide where it wants to align goals and or methods - that looks very much like cherry picking or sector-based participation in the single market and that is something that the EU cannot accept,” he said.

“And more broadly, what is important to understand is the single market is an ecosystem where rules develop and are enforced jointly and so alignment also means a joint enforcement system.”



The official stressed the timeline was short for negotiations and said the UK needed to quickly come forward with proposals to pave the way for a “precise declaration” on the future relationship.

“There needs to be a plan for the European council to work with. The clearer the UK can be on its future relationship, the more productive the European council can be.”

The government has promised to give a presentation on the question of the future relationship on Friday during Brexit talks, but by then the decisions of this week’s sub-committee meetings will not have been put to May’s full cabinet.

EU officials and diplomats in Brussels have expressed their exasperation at the lack of proposals from the UK on a trading arrangement, and warned that ruling out a customs union would mean a hard border in Ireland.



It is feared that, as a consequence, the problem of the Irish border will once again dominate talks in the coming weeks.

The European commission is currently drafting legal text on the first phase issues - citizens rights, the financial settlement, and the Irish border - along with the terms of the transition period, on which they hope to be able to have agreement by all parties in March.

But the lack of proposals on customs, and the red lines put down by the UK, are making the formulation of a legally binding text on the Irish border impossible, diplomats said.

Some member states in Brussels are insistent that without progress on that issue the EU should not offer the UK the assurances it requires on a transition period.

In a sign of the row to come, Guy Verhofstadt, the European parliament’s Brexit coordinator, told The Guardian that MEPs, who will have a veto over any future withdrawal agreement, were determined to back up Ireland’s demand for a solution that avoided a hard border.

He said: “It’s up to the UK to set out what kind of relationship they want with us and we negotiate on that basis. If the UK wants to put up barriers to trade that is their choice, though as a believer in free trade I regret it. Our priority will be to ensure there is no border put up again on the island of Ireland.”

Mujtaba Rahman, a former European commission and Treasury official, and now head of Europe for the Eurasia Group risk consultancy, said: “There is no plan in Whitehall on customs. This is the sleeping dog, as some have said. France and Germany are pushing the commission to be tough on this.”



