The UK government said it may walk out of trade talks with the EU by June if the two sides fail to make headway on a post-Brexit deal.
The pound fell by 0.8 per cent against the euro on Thursday as the government laid out its negotiating strategy.
The government wants a Canada-style comprehensive free trade deal and agreements on fishing rights, judicial cooperation and other areas including energy, aviation and civil nuclear cooperation, according to a paper published on Thursday.
It said if it did not make headway with its “fair and reasonable” proposals it would switch to preparing the UK for life without a deal.
Talks are due to start Monday and the government said it wanted the “broad outline” of an agreement before a high-level meeting in June that could be finalised by September.
“If that does not seem to be the case at the June meeting, the Government will need to decide whether the UK’s attention should move away from negotiations and focus solely on continuing domestic preparations to exit the transition period in an orderly fashion,” according to the 36-page document.
The document was released amid deep disagreements between the two sides about what a future deal would look like. The document said the government would not “negotiate any arrangement in which the UK does not have control of its own laws and political life”.
But the EU has indicated that the UK is expected to remain aligned to rules covering state subsidies, environmental standards and workers’ rights – a position that Prime Minister Boris Johnson is unlikely to agree to.
Britain left the European Union in January but is in a transitional phase until the end of the year when it follows its rules and enjoys the benefits including a single market and freedom of movement for people and goods.
Whatever the outcome of the talks, businesses have been warned to expect disruption at ports and its border with EU-member the Republic of Island as Britain leaves the single market and economic union.
