UK-EU trade deal will not be agreed before Brexit day, EU negotiator warns

The UK's Brexit trade deal with the EU will not be finalised before exit day, Guy Verhofstadt has warned. 

Instead there will be an "annex" inside the withdrawal agreement which will set out what a future relationship might look like, to be thrashed out during the transitional period while current rules remain in place.

The Prime Minister has previously ruled out such a situation, stating instead that a new trade deal must be agreed while negotiations to leave the union take place so the UK can be ready to forge new trade deals around the world in 2019.

The European Parliament's Brexit coordinator also warned that the right of EU citizens to move freely must remain throughout the interim period, despite Theresa May's pledge that anyone coming to the UK after Brexit would be subject to a new arrangement. 

And he said that if British MPs veto the final agreement between the two sides it could lead to a political collapse, another general election and possibly a new Government.

Speaking to the BBC's Andrew Marr Mr Verhofstadt said: "I think what is possible by the 29th of March of next year, if everybody agrees with it, the British parliament, European Parliament, will be the withdrawal agreement. Inside that withdrawal agreement also an agreement on the transition.

"The transition for example of two years, at the end of 2020 or the beginning of 2021. And the third thing that will be possible is an annex, a political declaration describing, more or less in detail I should say, the future – what the future relationship will be.

"And then we will use the transition period to clarify this political declaration in an international agreement."

His comments fly in the face of Mrs May's own plan for the UK's exit. 

The Prime Minister has previously said everything must be agreed in one go and her spokesman said last year: "Everyone has always been clear that we are looking to wrap all this up in one single go. Everything will be agreed at the same time."

Mr Verhofstadt, who is opposed to the UK's decision to leave the union, also claimed there can be no competition between British financial services and European states and warned that Britain must pay the price of leaving if it wants to forge ahead alone. But he claimed such a decision is not punitive because it was the UK's decision to leave. 

He said a bespoke arrangement is not possible, adding: "No. The outcome will be – there can be not a type of saying ‘oh this is interesting, that we like, this is not interesting for us, we dislike and we don’t want it.’

"What will be in that part of the association agreement we will see. Financial passports will not be there anymore because that’s the actual system.

"You need to be part of the Single Market to have – to have that. So that will be a far more difficult negotiation than simply to say, ‘oh, we like financial service and we put it in, we don’t like this sector and we put it out.’ But then that is for the – that it will be for the future. That will be not now."

He added: "What we don’t want is that with this whole agreement we establish a type of a financial centre that is competing with the Continent in, not in a serious way. By every time lowering taxes, lowering the type of rules so that we create a competitive disadvantage for the European financial services."

Ahead of a series of Brexit speeches by British ministers in the next few weeks, Mr Verhofstadt appeared to pile pressure on the next round of talks and suggested if MPs vote against the deal Jeremy Corbyn could be elected. 

He also appeared to hint that if Labour was in charge there would be "a new position of that new government on Brexit", adding it would be "unknown territory". 

He said: "If that is happening for example, the UK parliament voting down the deal, there will be, I presume, a crisis in British politics. I presume maybe an election. Maybe after that election a new government."