EU-UK Fisheries Impasse Revealed, Pound Sterling Sheds Ground against Euro and Dollar Ahead of Weekend

- EU said to offer up 15-18% of their fish quota
- UK said offer is derisory
- Pound fades recent gains as anxieties build

Johnson fisheries

Picture by Andrew Parsons / No 10 Downing Street

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EU and UK negotiators will meet for face-to-face talks in London on Saturday to try and thrash out a post-Brexit trade deal, but the British Pound shed ground as it the extent of the disagreement over fisheries was revealed.

The EU have - according to media reports out Friday - made an offer to the UK that would see the EU effectively cede between 15-18% of their current quota to the UK.

A UK source apparently dismissed the offer out of hand, leading to rising anxieties over the prospect of a deal being reached.

"The UK has already blown Michel Barnier’s plan to boost British fishing quotas by up to 18 percent out of the water before it arrives in London," says Joe Barnes, Brussels Correspondent for The Express.

Barnes says his source on the UK side told him: "it’s derisory, nothing more to say about it."

Prime Minister Boris Johnson on Friday told media there are “substantial and important differences to be bridged".

Both sides seem quite far apart on one of the most important matters that the two sides must overcome if a trade deal is to be agreed before the year-end cut-off for the transition period.

To hammer home the point of how far apart the two sides are: EU sources have told the BBC's Brussels Correspondent Chris Beake they were surprised at reports that Barnier will soon propose they give up between 15 and 18% of their fishing quota in UK waters as part of a Brexit trade deal. One diplomat said this percentage bracket was one of many discussed in the last two and a half weeks, and would be a 'very high price to pay' for EU fishing countries."

Beake says the UK is understood to be insisting that it should be able to double its catch in its own waters, as a consequence of becoming an independent coastal state.

"Another EU source claimed fishing negotiations were still in 'full swing' and these were among various percentages that had been 'bandied around' this month. A third EU source said an agreement on fishing was a long way off," adds Beake.

The Pound is reflecting rising anxieties over the matter, with the currency falling against the majority of its peers ahead of the weekend:

The Pound-to-Euro exchange rate is seen at 1.1175, down 0.30% on the day's open. The Pound-to-Dollar exchange rate is down 0.17% at 1.3330.

"All our short-term (1-3 month) dashboard tools argue to sell GBP," says Mark McCormick, Global Head of FX Strategy at TD Securities in a recent note to clients. "We think part of the Brexit process itself has been priced out. Brexit pricing, to the contrary, might be too upbeat now."

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Despite an apparent impasse, that the two sides are still talking will ensure the downside in Sterling remains ultimately limited.

"With the pound having gained ground against the euro over recent months, it is clear that traders either expect a last-minute breakthrough or have simply taken on a more relaxed stance to what originally touted as the worst-case scenario in 2016," says Joshua Mahony, Senior Market Analyst at IG.

There were some reports out earlier this week that said EU Chief Negotiator Michel Barnier might suggest to his UK counterpart David Frost that face-to-face talks were unnecessary given a lack of progress.

But it was confirmed on Friday by Barnier the talks are to proceed.

"In line with Belgian rules, my team and I are no longer in quarantine. Physical negotiations can continue. I am briefing Member States & European Parliament today. Same significant divergences persist," said Barnier, in a tweet out Friday.

As such, face-to-face talks would imply progress continues, even if it is at a slow pace.

Face-to-face talks were halted last week after a member of Barnier's team tested positive for covid-19, forcing the EU side into a period of quarantine. Despite the setback, talks have continued over video.

"Michel Barnier is heading to London in a bid to help break the deadlock in Brexit talks today, with just five-weeks to overcome a seemingly insurmountable fish-shaped wall in negotiations. Unfortunately, the evident desire to reach a deal from both sides has not been matched by a willingness to compromise, and thus there is little to indicate we will overcome the final hurdles" says Mahony.

Both sides continue to say they believe a deal is still possible.

"Some people are asking me why we are still talking. My answer is that it's my job to do my utmost to see if the conditions for a deal exist. It is late, but a deal is still possible, and I will continue to talk until it's clear that it isn’t," said UK Chief Negotiator David Frost on Friday.

Frost added that for a deal to be possible the EU must fully respect UK sovereignty.

"That is not just a word - it has practical consequences. That includes: controlling our borders; deciding ourselves on a robust and principled subsidy control system; and controlling our fishing waters," said Frost.

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