Fox Keeps Open `No Deal' Brexit Option as Business Balks

(Bloomberg) -- International Trade Secretary Liam Fox kept open the possibility of Britain exiting the European Union without striking a deal on its future relationship with the bloc, even as U.K. businesses ratcheted up their warnings against such an outcome.

Airbus SE said Thursday that failure to strike a deal would be “catastrophic” for the company and it would have to reconsider its investments in the U.K., where it employs 14,000 people and supports more than 100,000 jobs in the supply chain. Prime Minister Theresa May has repeatedly said that “no deal is better than a bad deal,” raising fears among companies that it's an outcome she would countenance.

“Our negotiating partners would not be wise if they believed that the prime minister was bluffing,” Fox said in a BBC interview to be broadcast on Saturday, the second anniversary of the vote. “It's essential as we enter the next phase of the negotiations that the European Union understands that and believes it.”

While Fox's remarks were recorded on Wednesday, before Airbus became the first major manufacturer to publish details of its contingency plans for a no-deal scenario, they will do little to dispel fears among U.K. manufacturers that Brexit may disrupt the movement of components and workers -- and force them to relocate operations to the continent.

Divisions

Pro-Brexit lawmakers argue that if Britain rules out a no-deal Brexit, the EU will offer it a bad deal in the knowledge that the U.K. will have to accept it. For detractors of Brexit, no deal is the worst possible outcome. May earlier this week contained a rebellion by her own Conservative Party on her key piece of Brexit legislation, defeating an amendment that sought to prevent her from walking away from negotiations without a deal.

Two members of May's cabinet who back leaving the EU, Foreign Secretary Boris Johnson and Brexit chief David Davis, in comments published in newspapers on Saturday noted a desire by the public to move forward and were upbeat about the future.

“Across the country I find people who, whatever they voted two years ago just want us to get on and do it,” Johnson wrote in the Sun. “They don't want some bog roll Brexit - soft, yielding and seemingly infinitely long. They want this government to fulfill the mandate of the people and deliver a full British Brexit.”

Read more: What's Left to Be Settled Before Brexit (Quite a Lot)

Davis, in an interview with the Daily Express, said the country will have an “fantastic” future of prosperity and opportunity outside of the bloc and reiterated Fox's position that Britain would be able to leave the EU without a deal. “In years to come, we will wonder why anyone ever doubted Brexit,” he told the newspaper.

May hopes to seal a divorce deal at an EU summit in October, as well as spelling out the substance of what the future economic partnership with the bloc will look like. As the negotiations pivot away from the divorce toward future trading ties, the EU's other 27 members are likely to become less unified in their approach, Fox said.

“As we move forward and we look at the economic positions, they're not the same across the whole EU: for example, the impact on not achieving an agreement with a country like the Netherlands or Belgium or Ireland is infinitely greater than some of the southern European countries,” he said. “So it would be much more now about how individual countries across Europe see their economic well-being being affected by this.”

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Stuart Biggs, Andrew Langley

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