British manufacturing shrank before virus hit

EU unveils draft of Brexit negotiating stance amid UK's poor economic data

The United Kingdom's need to agree a trade deal with the European Union gained urgency on Monday, after an industry survey showed that manufacturing in the country had weakened sharply in early 2020 even before the coronavirus crisis erupted.

UK exports shrank for the first time since late 2016 and output slumped as factories ran down stocks they had built up before a Brexit deadline in October, according to trade body Make UK and accounting company BDO.

In the survey conducted in the three weeks to Feb 19, Make UK cut its forecast for British manufacturing output in 2020 as a whole, saying it now predicted a drop of 2.1 percent compared with previous forecast for a rise of 0.3 percent. It warned that the novel coronavirus outbreak could mean a further cut.

"Even before the current situation, the shocking drop in exports could not have come at a worse time ahead of potentially difficult trade talks where the clock is running down fast," said Seamus Nevin, chief economist at Make UK.

"It is now vital that the government works with industry to limit the damage to industry and takes whatever steps are necessary to safeguard skills in particular."

The manufacturing data came out as the EU sent its 27 member states what the bloc's chief Brexit negotiator Michel Barnier said is an "ambitious" draft document setting out its proposals for future trade relations between the bloc and the UK.

Having left the union at the end of January, the UK is in an 11-month transition period during which it aims to formalize terms for future interactions between the two sides.

Chaotic consequences

If the terms are not finalized by the end of the year there is the risk of a so-called no-deal Brexit, which is widely predicted to have chaotic consequences.

Preliminary talks have already taken place but the next round of face-to-face discussions has been canceled because of the novel coronavirus outbreak.

"We've sent a draft agreement on new partnership to EP (European Parliament) and Council for discussion," Barnier tweeted. "It shows (that a) ambitious & comprehensive future relationship is possible. We must give ourselves every chance of success. We will publish the text after our exchanges & look forward to working with UK."

The document, entitled New Partnership between the European Union and the United Kingdom, will be presented to the UK government this week, but has been seen by the BBC.

Although it is incomplete, topics covered include a joint partnership council with 16 subcommittees, a plan for annual negotiations over fishing rights, and a program to cooperate on data exchange and extradition rules, provided the UK continues to implement the European Convention on Human Rights.

There is a psychological race to be seen to be the first to put something into the public spotlight, but this is balanced by caution from some on the European side who would like to see Britain's offering first, which is largely expected to be a straightforward deal, with no guarantee of EU regulatory alignment.

"Publishing the draft is not usual practice at this stage. It will only show that the EU and UK are on different tracks," Irish state broadcaster RTE quoted a European diplomat as saying.

"Barnier thinks it will show advantage but it doesn't. It will show that what we have is fundamentally different from what they have. If we do, doing so before the UK is especially not wise."

In July 2017, when he was foreign secretary, British Prime Minister Boris Johnson told the House of Commons: "There is no plan for no deal, because we're going to get a great deal," but his government is now talking about potentially walking away from the negotiation process if a deal does not seem likely.