Davis heads into first Brexit negotiations with confusion reigning

Brexit secretary David Davis will meet the European Union's chief negotiator Michel Barnier in Brussels on Monday morning to formally begin discussing the terms of the UK's divorce.

The first day of official talks will begin at 1000 BST and continue until early evening, with a joint press conference at 1530 BST.

Issuing joint comments as they head into the first meeting, Davis said the talks were taking place in a “positive and constructive” tone, and that "there is more that unites us than divides us”.

He said Britain was “determined to build a strong and special partnership with our European allies and friends”.

For his part, Barnier said he hoped the first meeting would allow his team to identify a timetable to be presented to EU leaders later this week.

"We must first tackle the uncertainties caused by Brexit, first for citizens, but also for the beneficiaries of EU policies and for the impact on borders, in particular Ireland," he said.

UNCERTAIN MOOD

With Prime Minister Theresa May's positions on watch within her Conservative party after squandered its parliamentary majority in this month's snap election, Wednesday's Queen's speech will open parliament and set the tone and direction for the next two years of government and Brexit talks.

It is unclear how much Davis and Barnier will be able to agree, with the Tories seeming to have dropped the "no deal is better than a bad deal" threat since the election, with many anti-Brexit ministers having gained confidence to push harder for a softer Brexit deal, putting jobs and the economy first.

Chancellor Phillip Hammond suggested on Sunday a less aggressive tone should be taken in negotiations, indicating that “transactional structures” would be needed to help smooth the process and that “we need to get there via a slope, not via a cliff edge”.

Rejecting the Prime Minister's "no deal" mantra, Hammond said that his position was one of a “jobs first” Brexit.

TALKS TIMETABLE

Barnier has been told by the EU leaders that the UK will need to reach agreement on exit terms such as the size of the Brexit bill, the rights of citizens and the Northern Irish border before the EU will discuss any post-Brexit trade deal.

Davis, who has previously said the discussion timetable would be “the row of the summer”, is expected to initially accept the EU’s approach, although a spokesman for his Department for Exiting the EU said: “As the EU has itself said, ‘nothing is agreed, until everything is agreed.’

A statement from the department said Davis will lead a team of negotiators to Brussels "confident that he can get a positive outcome and secure a new deep and special partnership with the EU" and that he will also set out "a bold vision for the UK’s future after it leaves the EU".

Sandro Gozi, Italy’s European minister, had new doubts about Britain's negotiating position since the election result. “It raises new uncertainties and there is a big question mark about the position the UK will take,” he told the Guardian.

EU negotiators told the Times that they fear without some early compromise in the talks, a newly weakened May might not survive the duration of Brexit talks this summer, but believe the Prime Minister might use a private Brussels dinner on Thursday to ease off on some of her previous demands.

On Sunday there was also a potential breakthrough proposal from Sigmar Gabriel, Germany's foreign minister, who said if the UK gives concessions on free movement of people the EU may offer a deal including reduced jurisdiction for EU judges over Britain and continued access to the single market.

In a report in the Welt am Sonntag newspaper he suggested if UK allowed free movement for Europeans it would be able to keep full access to the single market and also offered a major concession of “a joint court that is staffed by Europeans and Britons which in principle follows the decisions of the European Court of Justice”.

MARKET CONFUSION

The pound, which has since last year become a proxy for the market's view of Britain's Brexit prospects, was on the front foot on Monday morning, up more than 0.1% against both dollar and euro amid a picture that traders said was highly confusing.

"How do you negotiate when you don’t know your own position?" said market analyst Neil Wilson at ETX Capital.

"It seems bizarre to press on before the government is secure in its ability to command a Commons majority and before the Queen’s Speech, but the UK has to show willing – the dithering has to stop."

"Britain says it will approach the talks in good faith. A lot hinges on how it goes this week. The EU wants to secure cash and rights for citizens immediately and is not willing to mess around. For Britain to get a good trade deal it might have to acquiesce or talks could turn sour," he said.

The post-election dropping of the "no deal is better than a bad deal" threat among Tories is evidence of positive progress said economist Kallum Pickering at Berenberg.

"It can mean less scope for a messy fallout between the UK and the EU over the divorce settlement. Furthermore, that key pro-EU Conservative MPs including the Chancellors Philip Hammond, are more active thantn before in pushing for an exit that puts the economy and jobs first makes a softer Brexit more likely."

He suggested the Tories might get May to concede on parts of the Brexit divorce that are important to the EU but unpopular for UK Brexiteers, allow her take the flak and then drop her for a new Prime Minister who would have a free run at negotiating the trade deal.