The European Union is reportedly willing to soften its demand that Britain follow EU state aid rules after it leaves the bloc, in order to break the Brexit impasse.
Diplomatic sources told Reuters that Brussels may seek a compromise involving a dispute-settling mechanism on state aid in order to resolve the Brexit deadlock.
They said the compromise would mean the UK is free to settle its own state aid disputes with struggling companies post-Brexit, rather than having to follow EU rules from the outset.
“The room for compromise lies in something that will let the UK decide on its own since ‘regaining sovereignty’ is such a big Brexit thing,” said an EU diplomat close to the Brexit talks.
“We would reserve the right to decide on any consequences vis-à-vis access to the single market for UK companies as a result.”
The future of business between the EU and UK post-Brexit remains the biggest stumbling block in trade talks.
The 27 EU member states have urged London to agree to so-called “level playing field” guarantees that would allow Britain to continue selling goods freely in the bloc’s single market.
Without a deal, financial ties between the UK and EU will likely collapse overnight at the end of the Brexit transition period on 31 December and cause ripples across global markets.
It is likely the UK will still have to agree with the EU on a broad outline for company subsidies if a potential deal is reached.
EU Brexit negotiator Michel Barnier has repeatedly urged Britain to make its future plans on that known to the bloc.
Barnier has previously claimed he is ready to explore “creative” solutions because of the Prime Minister’s opposition to remaining under the threshold of the European Court of Justice.
Barnier is set to resume negotiations with the UK’s Brexit negotiator David Frost on 17 August following a brief summer recess.