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Pound under pressure as Barnier says Brexit talks in 'crucial moment'

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read

Watch: Why is fishing so important in Brexit talks?

Micheal Barnier, the EU’s chief Brexit negotiator, said trade talks were in a “crucial moment” on Tuesday afternoon, hours after his team rejected a fisheries compromise tabled by the UK.

Speaking to journalists in Brussels on Tuesday afternoon, Barnier said: “We are really in a crucial moment and we are giving it a final push.

“In 10 days, the UK will leave the single market and I will continue to work in transparency with the member states, right now, and with the (European) Parliament.”

The comments came as Barnier was preparing to brief EU diplomats and MEPs on the state of Brexit trade talks. Bloomberg reported earlier in the day that EU officials had rejected UK proposals on fishing rights. The pound dropped sharply on the report.

Sterling was down 0.3% the euro at €1.0947 (GBPEUR=X) by mid-afternoon. The pound was down 0.6% against the dollar at $1.3365 (GBPUSD=X).

The pound dropped sharply on the announcement. Photo: Yahoo Finance UK
The pound dropped sharply on the announcement. Photo: Yahoo Finance UK

On Monday evening, Bloomberg reported that the UK tabled new fisheries proposals in a bid to break the Brexit deadlock. Britain said the EU should agree to reduce the amount of fish it catches in UK waters by 30%, down from a previous demand of 60%. The EU wants no more than a 25% reduction.

If a compromise can’t be reached by 31 December, Britain faces falling out of the EU transition period and on to World Trade Organisation (WTO) terms. Britain’s official budget watchdog has said this would knock 2% off the size of the economy, given the added costs and slower speed of trade with the continent.

European Union's chief Brexit negotiator Michel Barnier speaks with the media at EU headquarters in Brussels, Tuesday, Dec. 22, 2020. Problems increased Monday in the bid to put a trade deal between the European Union and the United Kingdom before a Brexit transition period ends on New Year's Day, with the EU legislature insisting it will not have time to approve a deal. (AP Photo/Virginia Mayo)
European Union's chief Brexit negotiator Michel Barnier speaks with the media at EU headquarters in Brussels, Tuesday, December 22, 2020. Photo: AP Photo/Virginia Mayo

The prime minister’s spokesperson said on Monday that the government would not seek to extend the transition period despite ongoing disruption caused by the pandemic. Home secretary Priti Patel repeated this position on Sky News on Tuesday morning.

“WTO terms would be more than satisfactory for the UK,” Johnson said in a televised press conference on Monday evening. “And we can certainly cope with any difficulties that are thrown our way. Not that we don’t want a deal but that WTO terms would be entirely satisfactory.”

Britain’s currency fell sharply on Monday after Britain was cut off from the world. Over 40 countries closed their borders to the UK for fear of importing a new, more transmissible strain of COVID-19 discovered in Kent.

Chart: Yahoo Finance
Chart: Yahoo Finance

The blockade included France and hundreds of lorries were backed up on roads leading to Dover. Fears about food, medicine, and factory supplies hit stocks and sterling.

UK Prime Minister Boris Johnson held a press conference on Monday evening to address fears and said he was holding talks with France to resolve the issue. The BBC reported on Tuesday that France and the UK had reached an agreement and said new measures would be announced later today.

Transport secretary Grant Shapps, who appeared alongside Johnson at Monday’s press conference, said the ongoing border disruption showed Britain was well prepared for any potential fallout from a no deal Brexit.

WATCH: More travel bans as UK isolated over virus variant