British PM May Open to Longer Transition as ‘No-Deal’ Brexit Looms

Both the UK and key EU member states are preparing or already implementing contingency scenarios for a “no-deal” Brexit, as British and European officials appear to be unable to resolve their differences on the separation process.

Kristian Rouz — UK Prime Minister Theresa May says that although there is no need to push the Brexit deadline beyond March 29, 2019, she would be open to such a scenario. Her statement comes amid Germany and France announcing they are preparing contingency plans for a "no-deal" Brexit, while the British public and businesses are still divided on the matter.

PM May said her cabinet is willing to negotiate a longer transition period with the EU, as disagreements over the Northern Irish border, divorce payment, customs union, and a future trade deal still mar the UK-EU talks.

"A further idea that has emerged, and it is an idea at this stage, is to create an option to extend the implementation period for a matter of months, and it would only be a matter months," May said.

May made her remarks at the ongoing summit of EU leaders Thursday. She added, however, the UK is not planning to use such an extension but suggested an agreement to continue Brexit talks could come in handy amid the heightened expectations of the UK leaving without a deal.

READ MORE: May Expects Brexit Transition Period to End by Late December 2020 as Scheduled

German Chancellor Angela Merkel hasn't ruled out a "hard Brexit" scenario, as the UK appears to be unable to accept the divorce terms proposed by Brussels.

"We're preparing for every scenario," Merkel told the Bundestag. "That includes the possibility of Britain leaving the EU without an agreement."

For its part, France has released a draft legislation that seeks to minimize the expected downside of a "no-deal" Brexit to the French economy. The proposals including enforcing a visa regime for Britons willing to travel to France, and stripping UK nationals residing in France of their regular immigration status.

"British citizens with a work contract under French law with a French employer, (and they) could be asked for a document authorizing them to work in France," the bill reads.

However, hardline British Tories have welcomed the seemingly alarming reports from the continent. Leading Brexit campaigner Jacob Rees-Mogg said a "hard Brexit" would not be such a bad outcome. For his part, former Foreign Secretary Boris Johnson stressed the UK must insist on a Canada-style free-trade deal with the EU before agreeing to any conditions.

"Leaving the EU on World Trade Organization terms would lead to a quite remarkable economic advantage for the UK," Rees-Mogg said. "Economists for Free Trade have calculated that a WTO agreement would result in a £1.1 trillion boost to the economy over 15 years because our trade with WTO countries has grown four times faster than our trade under single market terms."

READ MORE: 'We Need Prime Minister That Will Stand Up for Global Britain', MEP Says

Such sentiments are shared by the vast majority of the working class in the north of England, as well as in the mining regions of Wales. The core base of support for hardline Conservatives and UKIP believes the EU's single market has put them at a major disadvantage in international trade, which reflected negatively on the performance and employment across Britain's industrial sector.

Meanwhile, the Bank of England (BoE) has said a "hard Brexit" would pose a challenge for the EU, as the British central bank has already prepared a plan to prevent disruption in financial markets. For its part, the European Central Bank (ECB) hasn't taken similar steps, exposing the Eurozone to greater risk, British policymakers said.

In response, the EU has said it's up to private-sector enterprises to address the risks posed by a "no-deal Brexit", suggesting companies should pull capital from Albion at their discretion. But British central bankers insist institutionalized pre-emptive action is a necessary step, which they've already taken.

"My guess is that we will see some action," BoE deputy governor Jon Cunliffe said. "We are still talking to the ECB in the technical group."

For decades, Britain has been the main provider of clearing services for EU financial institutions, and a "no-deal" Brexit could produce a disruption in derivatives and other financial tools, with some of the contracts becoming void.

READ MORE: No Grounds for Optimism' on Brexit Ahead of European Council — Tusk

For her part, PM May has proposed a "standstill" transition period until the end of 2020 for the financial sector — however, she said, such an agreement could only be part of a mutually-beneficial Brexit deal.

"She (May) is losing the confidence of colleagues of all shades of opinion. People who have been supportive of her throughout this process, they are close to despair at the state of this negotiation," Conservative MP Nick Boles said. "It really is a desperate last move."

With Brexit talks have entered their final stage, both sides appear to be upping the ante by hitting the opponent where it hurts the most — be it financial services for the EU or migration issues for Britain.

Uncertainty is still rife, and even a preliminary accord on a Brexit agreement might come as a minor relief in the face of the immense complications of the divorce process.