European Union gets ready for failure of Brexit talks

British Prime Minister Theresa May delivers a speech during the annual meeting of the World Economic Forum in Davos, Switzerland. Photo / AP

The European Union is quickening its preparations for a "no deal" Brexit, more than doubling the number of officials devoted to preparing for a breakdown in the talks.

EU sources said the number of officials in the European Commission secretariat focusing on preparations for either a "no deal" scenario or a "hard Brexit" would expand from eight to 20 as concerns mount in Europe over whether Prime Minister Theresa May can deliver.

The decision to increase the numbers in the unit was in part a reflection of growing anxiety in Brussels that political divisions in the UK may make a deal impossible, EU sources said, particularly given the UK's commitment to avoid a hard border in Northern Ireland. "The overall optimism that there can be a deal has decreased in the commission given the events of this month," said a senior EU source.

Pressure is increasing daily on the Prime Minister to define what kind of future relationship the UK will seek with Europe after Brexit, with her Cabinet now in open warfare over what direction to take.

EU sources said the lack of clarity from the British side was "highly disturbing" and that failure to set out what the UK wanted risked delaying the start of future relationship talks.

The EU has proposed releasing negotiating guidelines on trade and the future in March, but sources said this could now be delayed if the UK did not clarify its position, or continued to adopt a "cake and eat it" approach to the negotiations.

The battle over whether the UK will embrace a hard or soft Brexit was thrust into the spotlight last week after the CBI called for the UK to remain in a customs union with the EU, and Philip Hammond, the Chancellor of the Exchequer, said the UK's relationship with the EU would only see "modest" changes. He was later publicly rebuked by Downing Street.

A leading group of hard Brexiteers is urging May to go for a basic Canada-style deal which the Treasury estimates would be deeply disruptive and costly. Government departments are being asked to draw up detailed, quantified, assessments of where the economic benefits of such a harsh Brexit would lie. It also remains unclear how opting for a Canada-style deal can be reconciled with the British pledge in December to avoid creating a hard border in Northern Ireland.