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EU dangles Brexit carrot if Britain changes mind and stays in customs union

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Guy Verhofstadt, the European Union's chief Brexit negotiator, speaks outside 10 Downing Street in London, March 6, 2018. REUTERS/Peter Nicholls

BRUSSELS (Reuters) – The European Union could offer Britain a closer relationship after Brexit if Prime Minister Theresa May decides to stay in the bloc’s customs union, diplomats said.

The EU hopes London could change its stance on what ties it wants after Brexit after Britain’s upper house of parliament challenged the government on a key bill relating to Ms May’s plan to quit the customs union.

Diplomats and officials in Brussels cite little progress in Brexit negotiations since the last meeting of all EU leaders in March. Back then, Ms May won the green light from her 27 colleagues to start talks about the two sides’ future relationship.

The impasse is largely because Brussels and London have so far outlined conflicting stances on their new deal after Brexit.

Britain says it will be dropping out of the EU’s single market and customs union after Brexit. The EU says these red lines mean the only possible framework for future cooperation between Britain and the bloc is a trade deal.

That, in turn, falls short of London’s ambition for a broad, bespoke deal.

But the House of Lords last week challenged Ms May’s refusal to remain in a customs union with the EU after Brexit, and the lower chamber is expected to hold a follow-up vote next month.

The Lords want to oblige the government to report on what steps it had taken to negotiate a customs union and May is now gauging the support of her divided Conservative party to any change of plans.

“A customs union would change the dynamic between Britain and the EU. It would show that the British really do want to stay close to Europe,” a senior EU diplomat said in Brussels. “If they did do that, I think the EU could be quite responsive.”

The bloc’s Brexit negotiator Michel Barnier has already suggested just that in his comments at the Hanover trade fair earlier this week.

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