May’s Brexit breakdown: UK must settle ‘divorce bill’ says EU’s chief negotiator

PM increasingly vulnerable as Chancellor Philip Hammond refuses to give explicit backing to take party to next election

Hopes that Theresa May’s Florence speech would break the deadlock in EU talks have been dashed after the bloc said her proposed transitional period could not be discussed until the UK settled its Brexit divorce bill.

Despite initial signs that Ms May’s speech may help move things forward, the UK and EU negotiating teams ended the first day of further talks in Brussels in deadlock.

Chief Brussels negotiator Michel Barnier explicitly ruled out transition-deal talks until the divorce bill, citizens’ rights, and Northern Ireland are dealt with, while Brexit Secretary David Davis ruled out settling Britain’s divorce bill without discussing Britain’s future relationship with the EU.

It comes as German Chancellor Angela Merkel’s key aide called Brexit an “awful complicated mess”.

In London, Ms May’s position seemed increasingly fragile as Chancellor Philip Hammond failed to give her his explicit backing to take the party into the 2022 election, while other senior Tories warned Boris Johnson he does not have enough support for a leadership bid.

In her speech in Florence on Friday the PM said she wanted a two-year transition period in which Britain would stay in the single market, to provide “certainty” for business and avoid a disastrous cliff edge. It raised hopes that the move would encourage the EU to begin talking about a new trade deal.

Mr Barnier had initially welcomed the speech, but warned that Mr Davis would have to set out the “concrete implications” when he arrived in Brussels for the fourth round of talks on Monday.

But as the day’s session continued, the Frenchman said: “Discussing a transition period can only begin if we reach an agreement on an orderly withdrawal. That’s the mandate I have at the moment.

“The discussion that is going to take place on this transition period – because the UK is asking for it – does not mean that we don’t need to achieve ‘sufficient progress’.

“Progress on these three issues [the divorce bill, citizens’ rights, and Northern Ireland] is more important than ever in order to create the trust that we need to build our future relationship.”

Taking a diametrically opposed approach at a joint press conference in Brussels, Mr Davis later insisted that a deal on money could not be struck without discussions on the future relationship.

He said: “On the financial settlement as part of a smooth and orderly exit, we do not want our EU partners to worry that they will need to pay more or receive less over the remainder of the current budget plan as a result of our decision to leave.

“The UK will honour commitments we have made during the period of our membership, but it’s obvious that reaching a conclusion on this issue can only be done in the context of and accordance with our new deep and special partnership of the European Union.”

He added: “The UK is absolutely committed to work through the detail. We are laying out concrete proposals and there are no excuses for standing in the way of progress. It will take pragmatism on both sides to make headway.”

The talks taking place in Brussels were meant to take place last week but were postponed, officially to allow more time for non-specific “consultation”, but actually because of the PM’s Florence speech.

In London days of cabinet turmoil continued as Chancellor Mr Hammond was repeatedly asked to give his support to Ms May’s plan to stay in post until 2022, but failed to give her his backing.

During a trip to Scotland, he declined to say Ms May is the “optimum” individual to lead the Conservatives into the 2022 election despite being asked four times.

He said: “Well I am not going to get involved in the discussion about future Conservative party leadership politics.

“Theresa May has made it very clear that she has a job to do, I am completely behind her in doing that job.”

The Conservative conference will start at the weekend with speculation about Ms May’s future rife amid claims that 30 Tory MPs are willing to sign a letter challenging her leadership

Senior Tories have warned Boris Johnson he does not have the support among Conservative MPs to launch a leadership challenge that could destabilise the party and spark an election letting Jeremy Corbyn into Downing Street, amid talk that he may attempt to move on Theresa May’s leadership.

One cabinet-level source told The Independent “no one is going to back Boris” if his recent moves to publicly impose his will on Brexit end up strengthening the Labour leader.

Another senior supporter of the Chancellor accused the Foreign Secretary of trying to set himself up for a “self-righteous resignation” from the front bench.

Even prominent Brexiteers said that while they were glad Mr Johnson is pressuring the Prime Minister, they believe the best option for delivering stability and Brexit is to keep Ms May in post until after EU withdrawal.

Mr Johnson has also stoked speculation about a possible leadership challenge after he wrote a 4,000-word article setting out his Brexit vision shortly before Ms May was to give her own major speech. After she delivered it, he is said to have set out red lines in a bid to control the Government’s position, with allies claiming he had blocked Mr Hammond from securing a longer Brexit transition period.