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British Prime Minister Johnson and European Union chief von der Leyden agree that there is a strong possibility the UK may not be able to strike a trade deal with the EU.
The United Kingdom's departure from the European Union is set to take place within three weeks, and it will most likely take place without a trade deal, according to the views of British Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen.
Britain abandoned the EU formally in January, but throughout the year, it has maintained an informal member status until December 31 – which marks the end of the transition period during which the island nation remained in the EU's single market and customs union.
Annual trade between the nation and the continental group reaches about $1 trillion, with both sides saying they want to maintain. Still, after almost a full year of negotiation, talks are at an impasse.
"It's looking very, very likely we'll have to go for a solution that I think will be wonderful for the UK, we'll be able to do exactly what we want from January 1, it will obviously be different from what we set out to achieve," Johnson told reporters.
European Commission chief von der Leyen also told EU leaders that a no-deal was more likely than a deal, an official said.
FT Exclusive: Brussels has warned EU governments not to break ranks or entertain the idea of side deals with Britain should trade talks fail, urging a firm line in order to force the UK back to the negotiation table 'as soon as possible' https://t.co/ajh4L0y3pZpic.twitter.com/lHn4bljK0v
Both leaders have set a deadline, this Sunday evening, for negotiators to break the impasse at the talks deadlocked over fishing rights. Simultaneously, the EU wants Britain to face the consequences for any potential future diversion from the bloc's rules.
As the five year Brexit crisis is approaching an uncertain end, given the warning issued by leaders on both sides about the possible failure of talks, investors started to consider the risks associated with a chaotic finale. Sterling tumbled, stocks fell, and implied volatility surged. The pound fell 0.8 percent against the dollar to $1.3184 before recovering somewhat.
A Brexit without a trade deal would damage Europe's economies, send shockwaves through financial markets, snarl borders and sow chaos through the delicate supply chains that stretch across Europe and beyond. Another serious consequence would be that the UK would lose zero-tariff and zero-quota access to the European single market of 450 million consumers overnight.
The Bank of England took steps on Friday to keep banks lending through 2021 as Britain also tackles the COVID-19 pandemic and prepares for any market disruption from a significant change in the UK's trading relationship with the EU.