French President Emmanuel Macron put the situation bluntly on Friday: Britain needs a trade deal more than the EU after Brexit.
After British Prime Minister Boris Johnson annoyed the state of the Brexit talks and urged UK companies to prepare for a tough exit from the EU single market in eleven weeks, Mr Macron insisted that the EU keep the upper hand.
"The British need the European single market, no matter what they were told during the referendum campaign," he said after an EU summit in Brussels on Friday. "They are much more dependent on us than we are on them".
This calculation underpinned a decision in Brussels to prepare for further talks in London, although Mr Johnson insisted that only a "fundamental" rethinking of the EU's demands could block the negotiations.
"Trade talks are pointless if the EU does not change its negotiating position," said a UK spokesman.
The UK's threat to break off discussions was widely seen in Brussels as a negotiating ploy. Mr Macron said that Michel Barnier, the EU's chief negotiator, has been empowered to "continue talks for the next two weeks," while Commission President Ursula von der Leyen wrote on Twitter that officials are "as planned" London would make the way next week "to intensify these negotiations".
We saw some light in the last few days of negotiations, but also shadows
EU officials also pointed out the importance of the UK leaving. Leaving the talks and pursuing what the UK is referring to as 'Australian' would mean EU import duties on UK goods, particularly agricultural products, and a loss of access rights for service providers from lawyers to truck drivers.
The message was confirmed by British business groups, which warned that many companies were unprepared for the disruption, bureaucratic burden and cost of dealing with EU counterparts over the next year.
Carolyn Fairbairn, CBI general manager, said "this is not the time to give up". She added, "A deal is the only outcome that will protect Covid-affected livelihoods at a time when every job counts in every country."
UK automakers would face new tariffs, while Cabinet Minister Michael Gove has admitted that leaving the EU without a deal would have a “significant and harmful” effect on farmers, putting tariffs of at least 40 percent on sheep meat and beef.
In his short televised statement, Mr Johnson focused on the EU summit, which was taking place on the day he had set the deadline for a deal. Officials in London on Thursday made a decision by EU heads of state and government to remove a commitment to intensify talks from their final statement. (EU diplomats said the change was made to avoid putting pressure on Mr Barnier.)
A senior British official, aware of the talks, said the mood on the British side was "very gloomy" and that the conclusions of the EU leaders' summit that London should take the first step in finding a deal were like one "Cup of Cold" landed ".
Mark Rutte, the Dutch Prime Minister, admitted after the summit that there had been a "misunderstanding" about the wording of the conclusions, giving the UK the wrong impression that the EU was asking it to make all concessions.
"On our side, we also think we should accelerate together," said Rutte.
This message was shared by other EU leaders, including Angela Merkel, who insisted that if both sides compromise, an agreement has yet to be reached. "We saw some light in the last few days of negotiations, but also shadows," said the German head of state on Friday afternoon.
The question now is how the stalemate can be overcome. The three main sticking points are the difficult issues of EU fishing rights in UK waters, a level playing field to prevent unfair competition between UK and EU companies and dispute settlement arrangements for the deal.
While there has been an intense focus on the fisheries dispute over the past few days, Ms Merkel and Mr Macron stressed that the issue of fair competition – particularly in the area of state aid – is crucial, and the French President said it was is the "main problem, number one".
Even when leaders urged the UK to gain a foothold on the issue, the bloc gave its clearest indication yet that it was ready to explore creative compromises on the highly sensitive issue of fisheries.
Mr Macron acknowledged that the life of the French fishing fleet must indeed change.
“Will the situation be the same as it is today? No, sure, our fishermen know, we know and we will be by their side, ”he said. “Can we accept a Brexit that sacrifices our fishermen? No, neither. "
France's leader said he knew the access "will not be the same, it will not be as ambitious as it is now".
“It will no doubt be conditional, maybe a fee. But it has to be long-term because we have to make each other visible, ”he said.
Many Conservative MPs still believe that Mr Johnson will sign a "five minutes to midnight" deal with the EU, and pressure from business leaders and farmers to compromise with Brussels will be high when the time to end Brexit – The transition period expires on December 31st.
Brussels believes that the talks could continue until early to mid-November if necessary, although this will dramatically shorten the ratification timetable.
Peter Mandelson, former EU Trade Commissioner, said: “There is now too little separation between the two sides for either side to afford a no-deal outcome. Of course, Downing Street will inflate their language to put pressure on the EU. However, I think Johnson is too politically weak to have the excitement that no deal over the chaos is coming from Covid. "
Additional reporting from Mehreen Khan, Guy Chazan, Dan Thomas, Michael Pooler and Peter Foster