European Commission President Ursula von der Leyen addresses the European Union parliament on results of the EU summit on Wednesday in Strasbourg, France. Photo: AFP

 

European Commission chief Ursula von der Leyen warned Wednesday that failing to rapidly negotiate a new trade deal after Brexit would hurt Britain more than it would the EU.

"The timetable ahead of us is extremely challenging," she told the European Parliament in Strasbourg, France. 

"In case we cannot conclude an agreement by the end of 2020, we will face again a cliff edge. This would clearly harm our interests but it will impact more the UK than us."

Eurosceptic British MEPs laughed at the warning, but it reflects a pessimistic mood among Brussels officials.

Britain is due to leave the EU on January 31, but will remain in a transitional arrangement until the end of the year while negotiators debate future trade ties.

Under the withdrawal agreement which Prime Minister Boris Johnson has agreed with Europe but not yet pushed through parliament, the UK could ask for a one- or two-year extension. But Johnson, who last week won a comfortable majority in the UK general election, insists he will not ask for more time and is preparing legislation to forbid such a move.

In this case, negotiators will only have 11 months to conclude a trade agreement, a task that officials on both sides have warned is extremely ambitious.

"We will organize these negotiations to make the most out of the short period. On February 1 we will be ready to propose a mandate for the negotiations," Von der Leyen said.

"I hope... that we will have an unprecedented partnership. This is not the end of something. It is the beginning of new relations between neighbors and I want us to become good neighbors with our friends in the UK. Long live Europe."

Ratings agencies Standard & Poor's (SP) and Fitch scaled back their warnings that Britain might suffer a new credit downgrade, saying Johnson's emphatic election victory last week reduced the risk of a no-deal Brexit next month.

S&P raised Britain's outlook to stable from negative while Fitch took the country off its rating watch negative list although it kept its broader outlook at negative.

S&P said it expected a no-deal Brexit at the end of next year would be avoided by London asking for more time.

"Despite the government's current stance, we expect that the UK will seek, and the EU will grant, an extension beyond December 2020 to negotiate the future relationship between the two," the ratings agency said.

Fitch said the risk of a "cliff-edge" Brexit at the end of next year had not disappeared.