Boris Johnson has said that unless there is a “fundamental change of approach” from the EU, Britain is prepared to move to trading on World Trade Organisation rules when the Brexit transition period ends.
The Prime Minister said this week’s EU summit in Brussels has made clear the EU is not prepared to offer the kind of Canada-style deal the UK is seeking.
“They want the continued ability to control our legislative freedom, our fisheries, in a way that is obviously unacceptable to an independent country,” he said.
“Given that this summit appears to explicitly rule out a Canada-style deal, I think that we should ready for January 1 with arrangements that are more like Australia’s.”
Australia does not have a comprehensive free trade agreement with the EU, which means most commerce is conducted on World Trade Organisation rules with tariffs on many goods as well as some quota restrictions and customs checks.
Mr Johnson had previously said that if there was no agreement by the time of the two-day summit, which began on Thursday, he would walk away from the negotiating table.
The Prime Minister’s announcement came after the summit conclusions agreed on Thursday called on the UK to make the “necessary moves to make an agreement possible”.
The EU’s chief negotiator Michel Barnier said he is ready to travel to London on Monday to continue the negotiations.
Following Mr Johnson’s statement, European Commission president Ursula von der Leyen said that visit will still go ahead as planned.
“The EU continues to work for a deal, but not at any price,” she tweeted.
“As planned, our negotiation team will go to London next week to intensify these negotiations.”
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Asked if he is now walking away from the negotiating table, Mr Johnson said: “What we are saying to them is, ‘Come here, come to us if there is some fundamental change of approach’.
“Otherwise we are more than happy to talk about the practicalities that I described – social security issues, road haulage and so on.
“But unless there is a fundamental change in approach, we are going to go for the Australia solution.
“And we should do it with great confidence – as I said, high hearts and confidence because we can do it.”
CBI director-general Dame Carolyn Fairbairn said it is essential not to give up on a deal.
“Neither side can afford to fall at the final fence,” she said. “A deal is the only outcome that protects Covid-hit livelihoods at a time when every job in every country counts.
“With tenacity, common sense and compromise, a deal is still possible.
“Businesses call on leaders on both sides to stay at the table and find a route through.”
In the run up to the summit, both sides had acknowledged significant differences remained over the issues of future fishing rights and state aid rules.
However few in Brussels believe Mr Johnson will simply walk away from the negotiating table.
