When silence isn’t golden

The U.K. has now published a flood of documents on Brexit but remained silent on the one topic most likely to derail a deal: how much money it will pay the European Union.

That’s a problem as talks resume next week with a deadline for making significant progress just eight weeks away. A continued reluctance to engage on the topic will prompt the EU to delay the start of talks on a long-term trade deal.

Investors have noticed. The U.K. made concessions to the EU in some of its position papers, yet sterling still fell this week to its lowest closing level in eight years.

“The thing that worries us is that it looks as if the negotiations over the bill are going to take a little bit longer,” said Mike Amey of Pacific Investment Management Co. “If we can’t agree the bill then we don’t even get through to the next round.”

There is a combination of frustration and bewilderment at the U.K.’s approach and its failure to engage on some of the biggest issues, two EU diplomats tell Bloomberg’s Ian Wishart.

The U.K. is refusing to get drawn into money as a deliberate negotiating strategy, a person familiar with its strategy said. That creates the possibility of the matter being settled at the 11th hour with Prime Minster Theresa May engaging face-to-face with 27 other leaders at a drawn-out summit in October.

Analysts estimate the EU wants the U.K. to pay a gross bill of as much as €100 billion, based mainly on the country’s previous commitments to the bloc’s central budget. While the EU isn’t demanding the U.K. signs up to a specific amount at this stage, it does want it to agree soon on a methodology for calculating the final figure.

The EU bases its bill calculations on the U.K.’s past commitments, but Britain believes the payment could be determined partly by the scope of future access it gets to EU markets. The concept of a bill is also an emotional issue for Britons and a politically loaded one for May, given that some voters backed Brexit to stop cash flowing to Brussels.

“October might be a bit optimistic to start full-blown trade talks,” said Mats Persson, a former U.K. government official now head of international trade at EY. “This will very much come down to money, whether you can get to some principle agreement on money.”

The Sun reported Brexit Secretary David Davis will go on the attack at the talks, criticizing the EU team for being “stubborn and unreasonable.”

— Simon Kennedy

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