Brussels forecasts UK growth will lag behind EU as Brexit talks resume
With the sixth round of Brexit negotiations starting, the European Commission has released economic forecasts that show Britain's growth being outstripped by an accelerating eurozone.
Alex Barker and Jim Brunsden in Brussels
From the Financial Times in Brussels, I'm Alex Barker, and this is FT News. We have a sixth round Brexit talks today. There's an ultimatum of sorts from the EU side. And the European Commission has released his economic forecasts, and things aren't looking great for the UK. Here to discuss this with me is Jim Brunsden, an EU correspondent for us in Brussels.
So Alex, to start this off, why don't you tell us a little bit about this latest round of Brexit talks in Brussels and how they're progressing if they're progressing at all?
This is the sixth round. It's a shorter version, two days. David Davis is turning up tonight to meet Michel Barnier, the EU's chief negotiator, tomorrow. And basically there's unlikely to be a big breakthrough this week. And what they're discussing is the choreography of how they might try and bring together a deal on money and transition for December. And the EU's warning to the British side is that if there isn't a big move on the financial settlement from the UK over the next two to three weeks, they're putting in danger the ability for the EU to agree to something on transition between themselves and have it ready for a kind of simultaneous deal in December.
Because surely time is getting pretty short, isn't it? I mean if we're not going to see any appreciable headway in the talks this week, how much longer can we go on until things actually really come to a head? And what does it mean for the December summit if they don't?
Well indeed, I mean, there is never much time in the Brexit talks. There's a bit of brinkmanship going on as well from the EU side. They want to put as much pressure on the Brits to come clean on the cash as soon as possible. Probably when you're reaching December, that's really a critical period where, if the UK hasn't offered close to what the EU is expecting, and if the UK hasn't had assurances from the EU side that they would receive in return something clear on transition, by December then this is looking a bit more dicey. But there's a bit of kind of negotiating to come. I think the last week in November is really going to be critical.
And should we be expecting to hear anything from David Davis tomorrow? And if so, what kind of positive messages could he give at this stage?
Well if they want to show momentum, citizen rights is an area where they're already pretty advanced in terms of the negotiation. There's a few areas left open where the compromises have been kind of felt out by the negotiators. And they may want to show that there's kind of legs in the negotiation by making a bit of progress there.
Today the European Commission released its economic forecast for all 28 member states. What's this uncertainty mean for the UK economy?
Well perhaps unsurprisingly at this stage, the news from Brussels for the UK on the economic front is not great. The Commission produces three sets of economic forecasts every year. And since the referendum on Brexit, we've had a bit of a roller coaster where initially there was some very negative predictions about the economic impact. Then the predictions were revised upwards when the project fear, if you like, of economic Armageddon after Brexit didn't materialise. But now what the Commission is saying is you can see a clear gulf emerge between what's turning into a much stronger, more broadly-based recovery in the euro area and sluggish growth in the UK.
And the big message from the Commission today is basically when you look at the euro area and you have growth now in every single member states of the euro area and the EU. But the UK is now, by 2019, expected to be the second slowest growing economy in Europe, with only Italy behind it.
And what assumption did they make about Brexit in coming up with [INAUDIBLE]?
Yeah, it was very interesting because the Commission is a little bit stuck on that in the sense that, to be able to compile figures for the EU as a whole, they do need to carry on making forecasts for Britain even after Brexit. So the Commission made predictions today of economic growth through 2019, but did it-- and they really emphasised this-- on a technical, no policy change scenario. So oddly now we have figures for the state of the British economy going through to the end of 2019, even though we know that something actually quite important will be happening in March of that year, which is Britain leaves the EU.
And were there any other big risks highlighted for the eurozone countries?
The ones you'd expect really, but Brexit of course being highlighted as one downside risk, but also just the prevailing environment of geopolitical uncertainty. Korea was mentioned specifically, for example, as another downside risk. But overall they were at pains to stress a very positive message, and one that we are now even beyond the tentative, kind of recovery phase to something that they hope will become stronger and broader-based going forward.
So springtime in Europe. Thank you very much Jim.