The reality of no trade deal with the EU is moving closer by the day – although Johnson may regret imposing such barriers

For this Vote Leave government, coronavirus might have a silver lining – amid all the pain, it could be a good year to cynically bury bad economic news, writes Andrew Grice

For the moment Boris Johnson is in a 'win, win' position – but that won't last for ever (Getty)

On Monday, about 100 officials from both London and Brussels will take part in a fourth round of negotiations on a UK-EU trade deal. Although it might seem like a sideshow given the coronavirus crisis, the session matters. Progress since the UK left the EU in January is virtually non-existent. “We are on different planets,” one EU official admits. A UK source agrees: “We are talking past each other.”

The need to video-conference hasn’t helped; no informal chats by the water-cooler to break the metaphorical ice. David Frost, Boris Johnson’s negotiator, has not had a “Zoom drink” with his EU counterpart Michel Barnier, though Frost would be well-qualified as a former chief executive of the Scotch Whisky Association. Instead, they exchange frosty letters designed to make the other side look unreasonable to their domestic audience.

Left to their own devices, officials suspect they could strike a trade deal by the December deadline, when the transitional period ends and the UK will leave the single market and customs union. But they are staring at three big roadblocks, which only politicians can clear.

The UK rejects EU demands for a “level playing field” on environmental, labour and state aid rules; wants an annual negotiation on access to UK fishing waters rather than a long-term deal and to deny the European Court of Justice a role in overseeing any agreement. These are not technical but fundamental differences, stemming from the UK’s desire to be an independent state. National leaders working 24/7 on the pandemic will go back to Brexit in the next few weeks, when Johnson will meet his EU counterparts. But there is no sign there will be any meeting of minds.

The EU would happily extend the transitional period for one or two years. Under last year’s withdrawal agreement, a decision on that must be taken by 1 July, but there is zero chance of Johnson agreeing. Allies say he wants a deal, thinks there’s a reasonable prospect of landing one and that the December deadline will concentrate minds.

I don’t believe UK ministers are bluffing when they tell me they do not fear a “no trade deal” scenario. They describe this as an Australian-style agreement (rather than Canada-EU style one), which conjures up images of beaches, beer and cricket but would mean trading with the EU on World Trade Organisation terms and tariffs.

Indeed, cabinet opinion appears to be hardening against any extension to the transition. Ministers think the UK economy will look very different after the crisis, a prospect that looms larger as the chancellor Rishi Sunak phases out his job retention scheme. Some firms will not survive the shake-up. Ministers prefer to talk more optimistically about backing the “industries of the future”, free from the constraints of EU state aid rules. They believe companies will develop new supply chains and “reshore” some overseas production to the UK to be more resilient in a future crisis.

Hardline Brexiteers on the Tory backbenches, who always regarded “no deal” as the holy grail, sense an opportunity. The economic turbulence triggered by coronavirus would dwarf any changes to customs procedures and tariffs taking effect on 1 January under a switch to World Trade Organisation (WTO) terms.

This argument finds favour in the cabinet, but alarms business leaders. With many firms already reeling, adding tariff and non-tariff barriers would mean a “double hit”. Some new Tory MPs representing manufacturing areas in the north and midlands are getting jittery. But they are unlikely to mobilise enough support in parliament to stop “no deal”, like last year’s cross-party alliance on the withdrawal agreement. With a majority of 80 and a mandate to “get Brexit done,” Johnson can be pretty confident of doing that in any way he chooses.

Brexiteer ministers argue that the public would not tolerate the £10bn cost of extending the transition for a year. Yet opinion polls suggest voters are more relaxed. The bill might be smaller. Despite Johnson’s hard line and the 1 July deadline for an extension, I suspect London and Brussels could concoct a fudge allowing talks to continue into 2021 to avoid a damaging “cliff edge” for business. For example, an implementation period could be built into an agreement in principle struck by December.

For now, Johnson spots a “win, win” position. He can threaten “no trade deal” in the hope of securing EU concessions. If the EU doesn’t blink, he will take the UK off the cliff in December anyway. It’s a dangerous game. In an unstable world facing a cold and trade war between the United States and China, it would be a self-inflicted wound to impose further barriers to trade with the UK’s biggest market on its doorstep.

Despite that, the chances of “no trade deal” are rising. For this Vote Leave government, coronavirus might have a silver lining, making it a good year to cynically bury such bad economic news. Perhaps we shouldn’t be surprised. After all, Johnson did once say: “F*** business.” He would only be living up to his own words.