The EU’s chief Brexit negotiator, Michel Barnier, signalled his willingness to explore new solutions to ensure that neither the EU or UK can use subsidies to undermine the other’s economies. This is a key part of Brussel’s “level playing field” demands in trade talks.
Prime Minister Boris Johnson promised last year that the UK will pursue an independent state aid policy.
His decision contrasted with Theresa May’s former plans, however, Mr Johnson has so far failed to reveal how it will work.
Mr Barnier said the UK “refuses so far to commit to a level playing field or to appropriate safeguards for our future relationship.
“It insists on being able to diverge substantially from current EU rules on data protection, on financial services, on state aid – where the UK has given us no indication of the future framework it plans to put in place.”
This statement from the EU negotiator is the second of two hits Mr Barnier threw at the UK’s absence of a proposal.
The UK will be going into an intensified negotiation period from Monday.
EU officials told the Financial Times that the absence of a UK plan “goes to the heart of the problem in the negotiations”.
They added: “A robust state-aid framework is obviously a key question of trust and a condition for progress.”
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EU officials have reportedly said that unless the UK put forward an alternative proposal then neither side can “even enter the conversation chamber” where a solution could be agreed upon.
Officials from the UK side have said that the state aid regime has not been revealed yet because it is part of the ongoing negotiations.
Mr Johnson has previously pledged to make it “faster and easier” for a government to intervene in failing industries.
However, The government has not tabled any legislation on state-aid policy.
They have also not made a consultation with industries about how a UK subsidy plan should appear.
The Department for Business, Energy and Industrial Strategy told the Financial Times that the UK was continuing to develop a new plan of subsidy control that would work “in the interest of our businesses” after the end of the transition.
The spokesperson added: “We will share further details in due course.”
The UK will be leaving the transition period at the end of the year.
On Monday, UK negotiators will be meeting face to face with the EU side in Brussels for the first time since March.
In a tweet, David Frost, the UK’s chief Brexit negotiator said: “This needs to be a real negotiation and some of the EU’s unrealistic positions will have to change if we are to move forward.”