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Britain’s top Brexit negotiator David Frost has signaled to his EU counterpart Michel Barnier that he will recommend that the UK leave without a trade deal if Brussels continues to demand that the UK align itself with its state aid rules. Mr Frost has already taken a tough stance on the issue in private meetings.
Barnier demanded to see Britain’s plan for its domestic subsidy regime by the time the Brexit transition period ends.
The regime is not likely to be published until the end of September.
The EU wants Britain to continue to follow rules that prevent the government from subsidizing British companies over its EU rivals.
A senior conservative source said Frost and others had spoken privately about whether to soften Britain’s line on state aid.
But Prime Minister Boris Johnson would have decided that the UK should not soften its position.
The source told the Times: “Frost has made it clear to Barnier that as things stand, he would have to advise Boris that we do not accept any deals.
“There has been a discussion about whether or not to commit to state aid, and Boris said no.”
Johnson’s senior adviser, Dominic Cummings, believes that state aid freedom could be one of the main benefits of Brexit.
READ MORE: Brexit preview: UK gears up for ‘highest grade’ trade bloc
“He is telling Boris that he should not do anything that undermines the Union.
“The argument is that if Brexit leads to the breakup of the UK, that would give Boris’s achievement in securing Brexit a bad name.”
Barnier has argued that the UK’s proximity to the EU means that it should not be allowed to create a competitive advantage over key industries.
Informal talks between the UK and the EU will resume next week before formal negotiations begin the following week.
A no-deal scenario is much more likely to occur than it was a month ago during negotiations.
The EU does not believe that an agreement will be reached before the European Council meeting on 15-16 October.
The two sides are deciding whether there should be a separate Brexit leaders’ summit or a “legal vehicle” to extend the negotiations beyond the end of December.
But Johnson is unlikely to delay the UK’s departure from the EU.
A government spokesperson said: “After the transition period the UK will have its own subsidy control regime and will not be subject to the EU state aid scheme.
“The government will establish more details of our internal regime in due course.”
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