Brexit breakthrough: Nervy EU blinks first with MAJOR trade deal concession

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European Union officials believe talks over a free-trade deal could be unlocked if David Frost is able to present Britain’s future plans for its state aid regime. Michel Barnier is understood to be ready to soften his demands for the UK to maintain the bloc’s laws governing tax breaks and state subsidies as part of the so-called “level-playing field”. The Frenchman had been ordered by member states to force Britain to align to Brussels’ anti-competition regime.

But European sources have claimed establishing a “common approach” between both sides for state aid policies could allow Boris Johnson complete control over Britain’s system.

“We need an understanding of what we consider the common rules,” one source told

“What we’re trying to see is what the state aid system is going to be and then the EU can establish how compatible it is with the type of partnership we’re considering.”

This could allow both sides to build plans for a dispute resolution mechanism that would allow either the UK and EU to retaliate against any perceived deviations from their common understandings.

Downing Street is yet to set out its future state aid regime for after the EU’s grip over Britain’s rules ends when the transition period expires on December 31.

The Prime Minister has been adamant any deal with Brussels must give the Government full control over policy decisions for the UK.

But trade experts have suggested Mr Johnson could form a clever pact with the EU to hamstring future Labour governments by blocking them from renationalising businesses.

Shanker Singham, Chairman of Global Economic Neural Networks, said: “The EU knows they’re not going to have a centre-right government in the UK forever.

“They came very close to having a Jeremy Corbyn government that would have nationalised Electricite de France and the German power companies.

“The smart thing for the EU to do is put in place some disciplines on the UK to stop them doing those kinds of things.”

Mr Frost returns to Brussels today to pick up the negotiations after a short summer hiatus.

Wrangling over a trade deal with Brussels last month ended in deadlock over fishing rights and the level-playing field.

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But No 10 believes a deal is still possible by the end of September and will work hard to “plug the gaps” between the two sides.

A Downing Street spokesman said: “There are many issues that will be discussed during this week’s round, not least a level-playing field, fisheries, trade in goods and services.

“There are many areas where there is convergence but we will continue to work to plug the gaps where any differences remain.

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“Our assessment is that a deal can still be reached in September.”

Mr Barnier has set a Halloween deadline for the completion of talks to ensure the future relationship back in place ready for the end of the transition period.

The Frenchman and his UK counterpart will have dinner tonight in Brussels and continue talks until Friday.

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