Time is now the key factor in Brexit talks

British hospitality industry in limbo as Brexit looms
British hospitality industry in limbo as Brexit looms

Brexit negotiations are increasingly being dictated by one key factor: The clock.

Some 16 months have ticked by since Britain voted to leave the European Union. Only 17 months remain until the divorce must be finalized.

Yet at roughly the halfway point, precious little progress has been made on what the separation will look like.

Britain and the EU agreed that talks would be divided into two distinct phases: The terms of divorce, followed by discussions about a future trading relationship.

Crucially, talks would only move to the second phase if the EU ruled that sufficient progress was made on three key divorce issues: citizens' rights, the border in Northern Ireland and a financial settlement.

EU leaders made clear Friday that while some common ground had been found, not enough progress has been made to move on to the second phase. Talks are effectively deadlocked.

The impasse has heightened fears that Britain will crash out of the bloc in March 2019, a result that would put the country's economy in grave danger.

Britain and the EU are tied together by hundreds of treaties that govern everything from nuclear materials to air travel. There are major unresolved questions over how to deal with customs, immigration and borders.

The scale of work yet to be done underscores how important it is for a breakthrough to be achieved -- and quickly. Business groups have already warned that their members urgently need clarity.

"Decisions and certainty are now needed to protect jobs and investment," said Carolyn Fairbairn, director general of the Confederation of British Industry. "Where agreement is within touching distance, make the final step."

Related: Why Britain needs the immigrants it doesn't want

British Prime Minister Theresa May has sought to reassure companies by coming out in favor of a two-year transition period, during which the terms of trade with the EU would remain the same.

But many businesses favor a longer transition of at least three years. Mike Rake, the chairman of telecom giant BT, told Bloomberg Friday that he wants the transition to last as long as a decade.

Related: Brexit jobs tracker

EU leaders made one concession to the ticking clock on Friday, announcing they would start internal discussions and planning for the second phase of Brexit talks.

But they were also clear that Britain must address key divorce issues before talks progress.

"We hope that we can begin phase two in December, but that depends if Britain allows for progress to happen," said German Chancellor Angela Merkel.

-- Alanna Petroff and James Frater contributed reporting.

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