Via Financial Times

Boris Johnson’s hopes of securing a Brexit deal were dealt a blow on Thursday after Northern Ireland’s Democratic Unionist party said it could not support the revised deal as it stands.

The prime minister needs the support of the DUP to be confident of winning a parliamentary vote on a new Brexit agreement.

In a statement, the party’s leader Arlene Foster and deputy Nigel Dodds said that “as things stand, we could not support what is being suggested on customs and consent issues and there is a lack of clarity” on value added tax.

The DUP has insisted that any new deal has to be approved by the Stormont assembly with cross-community support — the idea enshrined in the Good Friday peace agreement that sensitive issues must be passed by both nationalist and unionist communities.

This would amount to a veto for the DUP, something that Dublin, and therefore the EU, will not accept.

The party said in the early hours of Thursday morning: “We will continue to work with the government to try and get a sensible deal that works for Northern Ireland and protects the economic and constitutional integrity of the United Kingdom.”

The pound dropped 0.6 per cent against the US dollar to $1.2755 after the DUP’s statement early on Thursday morning. It has rallied sharply in recent days amid growing expectations that a no-deal Brexit at the end of this month is unlikely.

In Brussels, EU and UK negotiators managed to resolve their differences on a host of issues on Wednesday night related to the Irish border after Brexit, including customs rules and Northern Ireland’s right to have a say on the arrangements, said people familiar with the talks. The key outstanding issue was how to prevent fraud involving VAT. 

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“I want to believe an agreement is being finalised and that we will be able to endorse it tomorrow,” said Emmanuel Macron, the French president, at a press conference alongside Angela Merkel. The German chancellor commented that the news out of Brussels “could be worse”. 

In an evening briefing, Michel Barnier, the EU’s chief Brexit negotiator, told diplomats from the 27 other EU member states that the two sides had made “substantial progress” and that talks would continue into Thursday, even as the political situation in the UK remained uncertain. 

One Eurosceptic minister briefed on Mr Johnson’s plan said last night: “I’m very hopeful of a deal. I’m amazed at what he has achieved — it surpassed my expectations.”

The question now is whether a deal can be struck in time for a summit involving the bloc’s leaders on Thursday and Friday, allowing them to sign off the agreement.

Some EU governments are worried that they will not have time to examine the legal text in time for the start of the European Council summit, making formal endorsement by the leaders very difficult. One senior EU diplomat said this would raise the question of whether the UK would need an extension to its October 31 exit date to permit both the Westminster and European parliaments to ratify the departure deal. 

The EU and the UK have been seeking ways to avoid a hard border on the island of Ireland after Brexit as part of a withdrawal agreement, and negotiators made substantial progress on the fine detail of the new arrangements during Wednesday. 

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The UK has conceded that Northern Ireland will apply the EU’s customs and tariffs rules and have them overseen by the European Court of Justice. The agreement means there will not be major customs checks on the island and instead all goods will be checked in Great Britain.

Under the agreement, Northern Ireland would benefit from UK trade deals with third countries — a core demand of Mr Johnson — and Northern Irish businesses would be eligible for a rebate on some tariffs should the UK secure them.

Key questions in the Brussels talks have included how to give the Northern Ireland Assembly at Stormont a say on the arrangements — a particularly sensitive topic for the DUP. The Brussels negotiators settled on a complex system that would involve the assembly in having the opportunity to hold a vote on the customs and regulatory arrangements four years after the end of the UK’s post-Brexit transition period.

If the assembly decided to continue with the arrangements, further opportunities to vote would arise in later years. Even if Northern Ireland were to vote to junk the system, a two-year cooling-off period would ensue.

The two sides also haggled over UK demands to deviate from EU environmental and labour standards after Brexit. The draft political declaration accompanying the withdrawal agreement makes it clear that a zero-tariff deal between the UK and EU will be predicated on a high level of regulatory alignment by the UK to EU standards.

Reporting by Laura Hughes and George Parker in London along with Sam Fleming, Mehreen Khan and Jim Brunsden in Brussels