At the G7 summit in Biarritz, Boris Johnson said it was a "simple statement of reality" that in the event of no-deal Brexit the UK would withhold much of the £39bn financial settlement agreed by Theresa May.

Brussels sources have warned that future trade talks would be blocked until the UK agreed to a settlement.

The financial settlement was a "totemic" issue for EU member states, one official said. "The message will be ‘honour your debts, or we are not even going to start talking about a trade deal,’" the source said, reflecting a widespread view among diplomats.

Responding to the prime minister’s comments, Jean-Claude Piris, a former head of the EU council legal service, tweeted: "If the UK refuses to pay its debts to the EU, then the EU will not accept to negotiate a trade agreement with the UK."

In the event of Britain leaving the EU without a deal, the painstakingly negotiated withdrawal agreement negotiated between Theresa May and the EU would collapse, including the transition period intended to smooth the way to the UK’s new status. EU sources insist that the core provisions – money, citizens’ rights and the Irish border – would have to be agreed as a precondition for opening talks on trade.

But the UK government could also face fresh demands set by countries hit hard by a chaotic no deal. Diplomats expect that France and other coastal states would seek to make fisheries a key condition for unlocking talks on a future trade deal. "The EU reserves the right to extend the list" of phase one issues, the source said. "The first contender will be fishing, as member states will be facing some very, very angry fishing communities."

Fishing is one area where the EU stands to lose more than the UK from a no deal: EU-based fleets land about eight times as much fish from UK waters as British fishermen do in EU27 waters.

But the UK would be under intense pressure from business to strike a trade deal with the EU, its largest trading partner. Britain does around half its trade with the EU – the bloc accounts for 46% of UK exports and 54% of UK imports. At the weekend, Johnson insisted the UK "can easily cope with a no-deal scenario".

Sources on both sides of the Brexit divide fear it could take a long time to pick up the pieces of an acrimonious no-deal exit. Once the UK is outside the EU, any new agreement would have to be ratified by national parliaments, a process that could take years.

The prime minister has insisted it is up to the EU27 to avert no deal. "If we come out without an agreement it is certainly true that the £39bn is no longer, strictly speaking, owed," he said. "There will be very substantial sums available to our country to spend on our priorities. It’s not a threat. It’s a simple statement of reality."

In reality, the £39bn – a British calculation never confirmed by the EU – no longer exists. The figure was based a departure day of 29 March. As the UK remains a member of the EU, it has continued to pay into the EU budget, reducing its Brexit bill. The financial settlement consists of UK membership contributions until the end of 2020, as well as a British share of EU staff pensions and spending plans made by the EU28.

The European commission chief spokesperson, Mina Andreeva, said that the UK would be expected to "continue to honour all commitments made during in EU membership".

She told journalists: "Rather than going now into a judicial action threat, I think that it is important to make clear that settling accounts is essential to starting off a new relationship on the right foot based on mutual trust."

Johnson met the European council president, Donald Tusk, on Sunday in Biarritz but did not mention withholding part of the Brexit bill.

(Published by The Guardian, August 26 2019)
________________