The UK's cut-off date for post-Brexit trade talks could be extended after progress was made and Germany urged compromise on fishing access, sources have claimed.
Prime Minister Boris Johnson is reportedly willing to wait for the outcome of this week's meeting of European Union heads of government, while British head negotiator Lord David Frost is preparing to tell the cabinet a deal is in sight, the Daily Express and Independent reported.
German Chancellor Angela Merkel said the EU had to be more “realistic” about continued access to UK waters, adding that a deal must be “in British interests as well as the interests of the 27-member EU.”
Germany, the EU's richest member, exported some €75 billion worth of products to the UK in 2019, mostly manufactured goods including around €20 billion worth of cars and other road vehicles.
Johnson was set to discuss the progress of negotiations with European Commission President Ursula von der Leyen later on Wednesday.
Meanwhile sources told the Express that Frost would advise Downing Street that a trade agreement is possible if both sides work hard at it over the coming weeks.
But they said key issues remained unresolved, including EU demands for continued fishing rights in the UK's extensive national waters and for a ban on state aid to British industries.
Sources close to the talks have signalled progress has been made in a number of areas but the key sticking points of fisheries, enforcement of the agreement and future state subsidies policy remain. And Lord Frost will tell No10 a deal is still possible if both sides agree to work extremely hard in the coming weeks.
According to the memo from the European Council, the member states want "as close as possible a partnership" with the UK based on negotiating positions decided eight months earlier in February.
That directive included the key sticking points of a regulatory "level playing field" to prevent UK businesses out-competing European rivals and continued access to Britain's where three-quarters of fish are caught by foreign boats,
The memo said the EU 27 have "invited" EU Commission chief negotiator Michel Barnier to "intensify negotiations" so a deal can be struck and implemented before the UK's post-Brexit transition period ends on December 31 this year. But it also warns the bloc to prepare for a no-deal Brexit if no agreement can be reached.
“The European Council calls on member states, Union institutions and all stakeholders to step up their work on preparedness and readiness at all levels and for all outcomes, including that of no agreement,” it reads.
Despite Germany's desire to keep the UK car market open, the EU's second power France - along with the Netherlands and Denmark - could still block any deal that does not include fishing rights in the UK's exclusive economic zone.
“There’s politics on both sides of the Channel," said University of Suffolk senior politics lecturer Christopher Huggins.
Last week French Europe Minister Clement Beaune demanded Barnier - a Frenchman - put his country's channel fishermen above the interests of the rest of the bloc.
"Our fishermen will not be a bargaining chip for Brexit, they will not have to pay the price for Britain’s choices," Beaune said.
“We have a negotiator – Michel Barnier, who is French – who once again this week is in discussions with the British to try to find a deal," he added “But I will say one thing very simply: we will not accept a deal at any price because this is not in the interest of France or Europe."