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"Unworkable", "unacceptable", "impasse" - the words used to describe Brexit talks between Britain and the European Union do little to temper concerns that the two are heading for a chaotic divorce.
But behind the scenes, both sides are preparing concessions as part of what one British official called "a constructive dialogue" that could yet lead to a deal.
Officials and sources on both sides say there is clear will to try to overcome the obstacles to winning a withdrawal deal and agreeing a framework for future ties - a Northern Ireland border and EU-UK trade deal.
Details are scarce, but the EU is planning to start putting in writing its offer for future trade ties, a demand Britain has pressed after officials felt Prime Minister Theresa May was snubbed at talks in Austria last month.
Britain's departure from the European Union next year should not be seen as triggering a "race to the bottom" in regulatory standards, a top UK regulator said on Monday.Backers of Brexit say Britain should ditch some EU financial rules, such as caps on banker bonuses, in order to keep the City of London competitive as a global financial centre."The FCA does not see the UK's withdrawal from the European Union as an opportunity to join a race to the bottom in regulatory standards – quite the contrary," Charles Randell, chair of the Financial Conduct Authority, told an industry event.Britain's Hammond says UK can cope with no-deal BrexitBrexit has cost Britain 500 million pounds a week, study saysSome UK lawmakers have said the FCA and its sister regulator, the Prudential Regulation Authority at the Bank of England, should have a formal objective of maintaining competitiveness, meaning new financial rules must not be overly burdensome.Randell said this could imply some very difficult trade-offs with its existing objectives."How much loss of competition should we tolerate to ensure that a sector is competitive? How much loss of consumer protection? How much loss of market integrity?""I believe that if we deliver our existing statutory objectives of making our markets work well, consumer protection, competition and market integrity, then there should be nothing to stop the firms we regulate from making money and growing in global markets."'No-deal Brexit would cost European firms up to $18 billion''Don't bully us', Britain takes new combative tone to Brexit talksBritain's FTSE treads water, eyes on Tory conferenceSterling rises despite fears of Tory Brexit conflict
Brexit must not mean deregulation for banks: UK watchdog
Britain has also promised to bring a new proposal to unlock a standoff over preventing the return to a hard border between the British province of Northern Ireland and EU-member Ireland, possibly by compromising about regulatory controls on goods in exchange for Brussels embracing the use of technological fixes for customs checks.
With only six months to go before Britain leaves the bloc, the lack of clarity over the divorce has spooked markets by increasing the possibility of a no-deal Brexit, which both sides say they are working to avoid.
On Wednesday, May gives a speech to end a fractious annual conference of her Conservative Party, where Brexit rebels did much to undermine her stance of maintaining close ties with the EU.
On Thursday, Ireland's Prime Minister Leo Varadkar will be in Brussels for talks with the EU's Brexit negotiator Michel Barnier.
British Prime Minister Theresa May said on Tuesday that the European Union was not like the Soviet Union after her foreign secretary provoked anger by likening the 28-member bloc to the USSR.Foreign Secretary Jeremy Hunt cautioned the EU on Sunday that it was set up to protect freedoms but that the lesson from Soviet history was that if you turned it into a prison then the desire to leave would increase.When asked about Hunt's comment, May said: "As I sit around that table in the European Union there are countries there who used to be part of the Soviet Union, they are now democratic countries and I can tell you that the two organisations are not the same." 'Don't bully us', Britain takes new combative tone to Brexit talksBritain's Hammond says UK can cope with no-deal Brexit
After Soviet comparison, UK PM May says the EU is not the USSR
Senior diplomats in Brussels have been summoned to a Brexit meeting on Friday and Barnier is due to present to them an initial draft of the bloc's trade proposal soon after, which the EU hopes would woo Britain into more compromises.
While no new dates have been confirmed for the next round of negotiations between Barnier and British Brexit minister Dominic Raab, several EU diplomats said they expected them to take place in Brussels next week.
"It must be next week or it's too late to get anything done within our six week schedule," one person said, referring to a plan of having a preliminary Brexit deal at the next EU leaders' summit on Oct.18.
The remaining 27 EU states are due to host a summit on Nov. 17-18 to sign off on any agreement with Britain. Otherwise, they would switch to contingency mode and focus on preparing for a no-deal Brexit in which Britain leaves next March with no agreements in place to mitigate the economic shock.
European companies face potential tariffs of as much as 14 billion pounds ($18.28 billion) a year if the Britain and the European Union fail to reach a trade agreement, Britain's trade minister Liam Fox said on Monday."If we got no agreement with the European Union that would be very harmful to European trade too. European businesses would have to pay tariffs to access the UK's market, possibly to the tune of as much as 14 billion pounds a year," Fox told BBC TV."That is quite a big business tax to apply to European businesses. It is everyone's interest that we reach an agreement and do it as quickly as possible." ($1 = 0.7660 pounds)'Don't bully us', Britain takes new combative tone to Brexit talksSterling rises despite fears of Tory Brexit conflict
'No-deal Brexit would cost European firms up to $18 billion'
CUSTOMS VS. REGULATORY CHECKS
British officials have signalled new ideas will come. A focus will be attempts to come to agreement over customs arrangements on the island of Ireland to prevent a return to a hard border that inflamed sectarian differences in the past.
Raab welcomed Barnier's suggestion that technology could be used to help resolve the issue after London said it could not accept the bloc's proposal for Northern Ireland to effectively stay in the EU's customs union.
He also said Britain was looking at how regulatory checks on some goods could be used as part of a solution to move Brexit talks, notably on a "backstop deal" for the Irish border, forward.
London has indicated that it may consider options on regulations on the island of Ireland, noting there are already some different rules for agriculture and food products between Northern Ireland and the rest of the United Kingdom.
Britain cannot be bullied, Brexit minister Dominic Raab said on Monday, sharpening the government's criticism of the European Union for taunting Prime Minister Theresa May and souring difficult Brexit talks.May's ministers have come out one by one at their party's annual conference in the city of Birmingham to warn the EU that they will embrace leaving without a deal if the bloc fails to show "respect" in the talks to end Britain's membership.Just six months before Britain is due to leave the EU in the country's biggest shift in foreign and trade policy in more than 40 years, May faces growing criticism over her plans to leave not only in her governing party but also in Brussels.Party unity is on ministers' minds, encouraging the faithful to direct their anger at the EU rather than at their prime minister, who some eurosceptic campaigners accuse of leading Britain towards a "Brexit in name only".Britain's FTSE treads water, eyes on Tory conferenceOther ministers, such as finance minister Philip Hammond, have moved to point out that leaving without a deal could hurt Britain's economy, the world's fifth largest.Raab said he had called on the EU to match the "ambition and pragmatism" Britain had put forward with May's Chequers proposals, named after her country residence where an agreement with her ministers was hashed out in July."Unfortunately, that wasn't on display in Salzburg," he said, describing a summit last month in the Austrian city where EU leaders rejected parts of the Chequers plan."Our prime minister has been constructive and respectful. In return we heard jibes from senior leaders and we saw a starkly one-sided approach to negotiation."Sterling rises despite fears of Tory Brexit conflict"What is unthinkable is that this government, or any British government, could be bullied by the threat of some kind of economic embargo, into signing a one-sided deal against our country's interests," Raab said.Instead of the much-hoped-for staging post, the Salzburg summit has become a byword for a sharp deterioration in the atmosphere of the talks, when British government officials felt May was ambushed by the other EU leaders over Brexit.A tweet by European Council President Donald Tusk showing him offering May a selection of cakes with the comment: "A piece of cake, perhaps? Sorry, no cherries" "certainly had an impact", one official said."GET SERIOUS"With no divorce deal and a standoff over the shape of any future relationship, the possibility of a "no deal Brexit" has increased, with some businesses preparing for what they see as a worst case scenario.Britain's Hammond says UK can cope with no-deal BrexitBut one source close to the government said there was now a sense that the EU had realised that the tone set in Salzburg was "perhaps a bit off" and, behind the scenes, conservations between the two sides were more constructive.Hammond, for one, was keen to set a more positive tone."The mood is undoubtedly that people want to do a deal with the UK," he told BBC TV."Clearly there has been a hit to the economy through the uncertainty the Brexit process has caused. Many businesses are sitting on their hands frankly waiting to see what the outcome of this negotiation is before confirming investment plans."UK's Hammond says EU is in the mood for a Brexit dealBut his softer line won less support at the conference than those adopted by Raab, trade minister Liam Fox and foreign minister Jeremy Hunt, who on Sunday compared the EU with the Soviet Union which could turn into a prison from which not only Britain would want to escape.It was Raab, winning a standing ovation for his story about his father's journey from then Czechoslovakia after the Nazi invasion, who summed up Britain's new combative stance."The EU's theological approach allows no room for serious compromise," he said. "If the EU want a deal, they need to get serious."
'Don't bully us', Britain takes new combative tone to Brexit talks
But it was not clear whether the government would tolerate such a difference for manufactured goods.
"We said we would need to retain a UK-wide customs backstop and on the regulatory side of things, we have been clear that we will, as long as we can carry the communities of Northern Ireland with us, we will be open to looking at some of the options on regulatory checks," Raab said on the sidelines of May's Conservative Party annual conference.
The EU hopes a more developed promise of seeking close ties with Britain after Brexit could help May build a majority behind a divorce deal that the bloc insists must include an emergency fix for the Irish border.
The bloc has decided to flesh out the declaration on post-Brexit ties with Britain a bit more to make the case for Britons more compelling.