EU Acts to Prepare Path to Brexit Trade Deal, EU Sources Say

European Union member states have started to prepare their procedure to put in place a new trade deal with the United Kingdom from Jan. 1, three diplomatic sources in the bloc told Reuters, indicating a deal could be imminent.

Both sides are racing to avoid a turbulent split when Britain leaves the EU’s orbit on Dec. 31, 11 months after it formally quit the bloc and entered a transition period keeping it in the EU customs union and single market.

The two sides have given a dizzying array of conflicting signals: Britain on Wednesday said that two significant issues – fishing and competition – still remained to be resolved and that there had not been sufficient progress for a deal.

But during a meeting with the EU’s executive, the European Commission, – which is negotiating with Britain on behalf of all the 27 member states in the bloc – national diplomats in Brussels were told to be ready for a meeting on Thursday should a deal come.

“It seems the deal is pretty much there. It’s a matter of announcing it today or tomorrow,” said one EU diplomat.

The diplomat said the Council, which represents the member states in Brussels, had started preparations to enable a “provisional application”, or fast-track implementation, of the agreement.

Sterling stood up 1% on the day, above $1.35, and up 0.7% against the euro at 90.36 pence.

While EU sources have repeatedly signaled a deal may be near, British sources said on Wednesday that talks remained “difficult” and underscored the differences.

British Housing Secretary Robert Jenrick told Sky News that “at the moment there isn’t sufficient progress” at the talks.

Irish Prime Minister Micheál Martin said the gap on how much fish EU boats could catch in British waters was still wide.

“On balance, I think given the progress that has been made that there should be a deal,” Martin told the national broadcaster RTE. “A no-deal would be an appalling shock to the economic system on top of COVID-19.”

Britain’s mass-circulation Sun newspaper said a deal was “in sight” but being held up by a last-minute disagreement over batteries.

British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are in close contact and were expected to hold another call on Wednesday.

Investors were expecting swings in sterling as overnight volatility was holding above 25%.

Johnson, who is also grappling with a deepening COVID-19 outbreak and a border crisis at Dover, Europe’s busiest truck port, has said he will not sign up to any deal that undermines British sovereignty.

Walking away from the talks might win applause from many Brexit supporters in Britain but could cause severe disruptions to the goods trade that makes up half of annual EU-U.K. commerce, worth nearly a trillion dollars in all.