EU's Barnier open to discussing new Brexit customs arrangement

The European Union’s chief negotiator Michel Barnier had told MPs he was open to discussing alternative Irish customs arrangements in order to secure a Brexit agreement, news that lifted the pound on Friday.

Transcripts released on Friday from a meeting between Barnier and the Commons Brexit Committee on Monday revealed that Barnier made clear that Theresa May’s Chequers Brexit plan for customs and regulations was unworkable.

He said, however, that he was prepared to discussing a new 'backstop' agreement and plans to simplify checks on the Irish border.

Asked by the committee whether the Chequers plan was “dead in the water”, Barnier said, contrary to perfunctory reports of his comments to a German newspaper, he said Chequers deal had "lots of positive things, lots of useful things" and that he "did not just reject the White Paper outright; that is just not true".

But he said there were "two major problems, two issues that we cannot accept" - the proposal on customs and the proposal on the common rulebook for goods, stressing that the EU customs union "cannot be undermined and we cannot split up the four freedoms of the single market", free movement of goods, services, capital and persons.

Crucially he said: "We are prepared to discuss a customs agreement of some sort that simplifies customs arrangements between the United Kingdom and the EU. Customs co-operation could even be part of a free trade agreement, if it went that far, but we do have a problem with the way in which our customs controls and checks work at the moment."

Disagreements over the Irish border had been the key blocking point to a final withdrawal agreement.

“It confirms our longer-term positive outlook, which is predicated upon the expectation that the U.K. and the EU will arrive at a mutually beneficial deal by the end of the year,” said currency strategists at Credit Agricole.

“The Barnier comments are supposedly bringing us closer to that. That said, we are not out of the Brexit woods yet, and there are other thorny issues ahead that could cause market uncertainty.”

Analyst Neil Wilson at Markets.com said the pound's reaction was "super sensitive to good news as the pessimistic view has been well worn".

He added: "We’ve been here before with good news sparking a rally in GBP only for gains to be pared on the hard reality of it all. But the general tone looks increasingly more constructive."