Prime Minister May has said that a no deal is better than a bad deal, hinting that she would rather exit the EU without any agreement.
Officials from both the U.K. government and European institutions have said that they will work towards getting an agreement within two years.
However, both seem to be preparing for the eventuality of a no deal.
David Davis, the U.K.’s main negotiator, told the BBC last Sunday: “The simple truth is we have been planning for the contingency – all the various outcomes, all the possible outcomes of the negotiations.
“One of the reasons we don’t talk about the contingency plan too much is that we don’t want people to think ‘Oh, this is what we’re trying to do,'” he said, adding that such back up plans are unlikely to be used.
A second European official, who also asked to remain anonymous, told CNBC that the EU’s aim is to reach an agreement with the U.K., but in the “hypothetical scenario” of a no deal, the EU would “be prepared.”
Speaking in parliament on Wednesday, Brexit Secretary Davis said that the U.K. hasn’t made any economic impact assessment of a no deal, the Financial Times reported.
President Donald Tusk of the European Council said Wednesday morning on Twitter: “We will not be intimidated by threats that no Brexit deal is good for UK and bad for EU. No deal is bad for everyone, above all for UK.”
A no deal would mean that the U.K. would break with the EU without clear clues of what would happen to the City of London, for example. Trade between both could still take place but under World Trade Organization rules, which would mean higher costs for businesses in both the U.K. and the EU.
