Sterling fell sharply after several British media outlets reporting that Brexit talks were close to breaking down

Sterling fell sharply after several British media outlets reporting that Brexit talks were close to breaking down.

Sky News reported that German Chancellor Angela Merkel had told U.K. Prime Minister Boris Johnson that a deal for Brexit is now “overwhelmingly unlikely,” citing a Downing Street source.

Meanwhile, the BBC said a government official said the EU had not shown a desire to “budge one centimeter” since Johnson submitted new proposals to Brussels last week. The official, who was not named, said a deal was not completely ruled out, but the BBC cited another unnamed source as saying Johnson’s plans were “the only way out.”

The U.K. government’s new plans have received a lukewarm reception on the continent. This week was seen as the last in which both sides could try to find an agreement on a Brexit deal, ahead of the U.K.’s scheduled departure date of October 31.

The new proposals have aimed to get around the contentious Irish “backstop” arrangement — something of an insurance policy to prevent a hard border between Ireland and Northern Ireland if the EU and U.K. could not agree a post-Brexit trade deal. The U.K.’s new proposals would see Northern Ireland (a part of the U.K.) stay in the European single market for goods, but leave the customs union.

The U.K. said checks on goods going from Northern Ireland to the Republic of Ireland would undergo customs checks away from the border, taking away the need (the government said) for any physical border infrastructure on the island of Ireland. The EU is skeptical over British plans and Merkel reportedly told Johnson in a call Tuesday that Northern Ireland would have to stay in a customs union.

Source: CNBC

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