France drops demand for UK to pay up front for Brexit reset talks on cheaper food

EU chiefs have given the green light to Brexit-reset trade talks with the UK in a boost for No 10 just before the Budget.

Talks on reducing red tape for food and drink imports – which have been contributing to stubbornly high food inflation in the UK – were set to be derailed by demands from France that Britain begin paying into EU funds immediately as the price for access to the single market.

But a coalition led by Germany, the Netherlands, Ireland, Belgium and Luxembourg warned that pushing too far now could derail the reset before talks even begin.

The decision by EU ambassadors breaks days of deadlocks – but reveals that the much vaunted Brexit reset is far from straightforward, with the EU split over how much and when the UK should pay into the EU.

The i Paper reported earlier this week that the UK was ready to walk away from a deal on access to the EU’s defence fund over demands Britain pays up to €6.5bn (£5.7bn) for access.

A No 10 spokesman said on Thursday it would pay into EU funds only if the result was of benefit to the UK.

“Nothing has been agreed yet … we’ve always said that if a proportionate contribution to a specific EU system would result in tangible benefits to the UK, then that is the sensible, fair and pragmatic decision we will take.”

Keir Starmer and EU Commission President Ursula von der Leyen had agreed to the talks during a Brexit reset summit in May. At the time, Cabinet Office minister Nick Thomas-Symonds, who is leading the Government’s work on the Brexit reset, said that while the final details were still being hammered out, he was “confident” a deal on food could be reached.

A Whitehall source told The i Paper that securing improved trading terms on food would be one of the “biggest wins” from the reset deal as it would help boost the economy, and give confidence to businesses and consumers.

Green light for talks on electricity and energy tax

Speaking about this week’s talks, an EU official said: “They eventually agreed on a compromise proposal that effectively takes as its basis the agreement from last May.” The common understanding reached at the London summit contained no explicit reference to cohesion payments.

The final compromise authorises the European Commission to open negotiations on a common so-called sanitary and phytosanitary (SPS) area – a deal that would align the UK with EU food and animal-health standards, sharply reducing controls on goods crossing the Channel and easing long-running tensions over movements between Great Britain and Northern Ireland.

It also gives the green light for talks to link the EU and UK emissions trading systems (ETS), a move backed by industry on both sides and essential if British exporters are to avoid the EU’s new carbon border levy, which takes effect on January 1. Officials stressed, however, that a fully operational linkage will take years.

The ambassadors also agreed to fast-track preparations for a separate electricity trading agreement. After intense lobbying from “friends of electricity” – Germany, the Netherlands and Belgium – they invited the European Commission to produce a draft mandate by the end of December to restore smoother cross-Channel trading, which has been hampered since Brexit and blamed for higher energy prices and uncertainty for North Sea renewables investment.

UK payments still a fault line

Despite the progress, the long-running dispute over UK financial contributions remains the underlying fault line.

While London has signalled readiness to pay into schemes where it gains clear benefits – as it has for Horizon Europe and is considering for the €150bn (£133bn) SAFE defence programme – UK officials have been reluctant to endorse any open-ended commitment to EU budget funds.

Starmer’s Government has already pushed back against the opening EU ask of up to €6.5bn to join SAFE (Security Action for Europe), insisting it wants “value for money”. Diplomats said the European Commission updated ambassadors on the defence talks but did not seek approval for a negotiating mandate.

Meanwhile, the political urgency on the UK side is palpable. Starmer wants the SPS agreement operational in 2027 – a timeline British officials argue is necessary so voters feel tangible benefits before the next election.

But experts warn this is “sporty”, with complex regulatory alignment required and member states already concerned that London underestimates the scale of the task.

EU ministers are expected to formally rubber-stamp the SPS and ETS mandates at the General Affairs Council on Monday, allowing negotiations to begin next week.

Von der Leyen confirmed after a call with Starmer that both sides aim for “mutually beneficial outcomes” – particularly on SPS and SAFE.

Talks ‘vital to cutting costs at the checkout’

The progress was welcomed by Naomi Smith, chief executive of pro-Europe NGO Best for Britain. “These talks are vital to cutting costs at the checkout and reducing energy bills for both Brits and people in the EU,” she said. “Recognising the tangible benefits of closer EU-UK alignment, both sides must now act swiftly to make it a reality.”

Meanwhile, a newly published House of Lords report, Unfinished Business: resetting the UK-EU relationship, warns that delivering the reset will require far more detailed agreements than are currently on the table.

It also cautions that SPS and ETS alignment will inevitably require dynamic adaptation to evolving EU rules – and urges ministers to define what they consider a “fair” UK financial contribution before entering the next phase of negotiations.