EU's Barnier offers Britain close ties but 'no single market a la carte'

By Thomas Escritt and Kylie MacLellan

BERLIN/LONDON (Reuters) - The European Union is prepared to offer Britain an unprecedentedly close relationship after it quits the bloc but would not allow anything that weakened the body's single market, chief Brexit negotiator Michel Barnier said on Wednesday.

With seven months to go until Britain is due to leave the EU, the two sides are yet to reach a divorce deal. Officials increasingly expect an informal October deadline to slip into November.

Britain's Brexit minister Dominic Raab told lawmakers on Wednesday he was confident that a deal was "within our sights", although he added that there was "some measure of leeway" on the October timetable.

Sterling, which has come under pressure from growing concerns over the chances of Britain leaving the EU without a deal, rallied sharply after Barnier's comments.

"We are prepared to offer Britain a partnership such as there never has been with any other third country," Barnier told reporters in Berlin on Wednesday after a meeting with German Foreign Minister Heiko Maas, adding that that could include economic as well as foreign and security policy ties.

"We respect Britain's red lines scrupulously. In return, they must respect what we are," he said. "Single market means single market ... There is no single market a la carte."

Earlier this month Barnier said the two sides could have a trade agreement of "unprecedented scope".

RAMPING UP

The British government has been ramping up its no-deal preparations and last week published the first in a series of advice to businesses on how to prepare for the possibility it makes a clean break from the EU on March 29.

Quizzed by a committee of members of Britain's upper house of parliament on Wednesday, Raab cited the Irish border and the issue of data-sharing as among the main outstanding elements still to be agreed.

Raab said Britain could not be cavalier about the risks of a no-deal Brexit, an outcome which he said could be triggered at several different levels from the negotiators to the member states or the European parliament.

If a deal isn't reached, Britain could choose to withhold some payments to the EU, Raab said.

As part of a Brexit transition deal, Britain has agreed to pay the EU between 35 and 39 billion euros ($41-$46 billion) over the coming decades. But Raab said not all of this was a legal obligation.

"I don't think it could be safely assumed on anyone's side that the financial settlement that has been agreed as part of the withdrawal bill would then just be paid, in precisely the same shape or speed or rate, if there was no deal," he said.

(Additional reporting by David Milliken and William James; Editing by Andrew Bolton)