(Bloomberg) -- European Union chief Brexit negotiator Michel Barnier said it could take months before the divorce talks can move on to trade, in a blow to Theresa May's hopes for faster progress.
The fourth round of talks, while more positive in tone, failed to deliver the breakthrough that's needed for negotiations to start on the trade deal the U.K. desperately wants. Barnier said Britain still hasn't set out what it thinks the country owes the bloc when it leaves and there's no agreement on the role of the European Court of Justice -- one of the most contentious issues for both sides.
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"It's positive that Theresa May's speech made it possible to unblock the situation to some extent and give a new dynamic,” Barnier told a news conference with Brexit Secretary David Davis in Brussels on Thursday. “But we are far from the stage, and it will take weeks or maybe even months, where we will be able to say yes there has been sufficient progress on the principles for the orderly withdrawal. "
His comments dampened any remaining hope that May's speech in Florence last week would encourage EU leaders at their October summit to agree that “sufficient progress” has been made on the divorce for discussions to turn to trade. U.K. negotiators are frustrated by Barnier's stance, because he hasn't told them what would qualify as “sufficient progress,” according to people familiar with the U.K. position.
The pound strengthened as investors focused on Barnier's positive comments on the new dynamic. However, the options market shows sentiment has deteriorated this week with investors less upbeat about the pound's prospects a month from now.
Businesses were also alarmed, with the Confederation of British Industry taking the unusual step of issuing a joint statement with the Trades Union Congress urging the government to find a solution to the conflict over the rights of European citizens in the U.K. There was some progress on the issue, with the two sides agreeing on more than 60 percent of the areas up for debate, according to a technical document released by the U.K.
Attempt at Breakthrough
In Florence last week, May said for the first time that Britain would honor its financial commitments broadly and pay into the EU budget for two years after leaving. She also asked for a two-year transition, during which the current trading conditions and rules would apply, tying the bill to transition for the first time. While the speech was welcomed in Brussels, it didn't go far enough for London-based banks, which are pressing ahead with their relocation plans regardless.
Read more: Banks Are Said to Begin Brexit Exodus Despite Transition Call
May will get a chance to make a personal appeal at a dinner tonight with fellow leaders in the Estonian capital of Tallinn, where she is expected to flesh out the themes of the speech. The clock is ticking as the U.K. is set to drop out of the bloc in March 2019, with or without an agreement. The two-year transition deal depends on the goodwill of EU leaders, and can't be put in place unless there's a separation agreement.
Barnier said “useful” talks had been held over the financial settlement, but clarity was still lacking. Davis was more effusive: “I am clear that we have made considerable progress on the issues that matter.”
--With assistance from Marine Strauss
To contact the reporters on this story: Tim Ross in London at tross54@bloomberg.net, Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net.
To contact the editors responsible for this story: Emma Ross-Thomas at erossthomas@bloomberg.net, Richard Bravo
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