The stumbling block is revealed in a letter leaked to the Sunday Express in which the Brexit Secretary admitted last month’s talks with EU chief negotiator Michel Barnier were “difficult”.
In the July update, sent to MPs and peers on Wednesday, he states that the negotiations so far had “only served to reinforce my view that we cannot negotiate the UK’s exit properly without addressing what our future relationship looks like”.
Mr Davis wants to negotiate Britain’s EU exit and future trade deal with Brussels simultaneously but the remaining 27 member states do not want to discuss trade until the so-called divorce bill is finalised.
Mr Barnier is said to have warned EU ambassadors the first rounds of negotiations failed to find agreement on citizenship rights, the Irish border and Britain’s divorce bill.
This has cast doubt on whether enough progress has been made for talks on a free trade deal to start in the autumn.
But Mr Davis reassured colleagues: “We continue to work hard and at pace. Our goal is to secure a deal that works for all parts of the country.”
He said Britain had taken a “significant step forward” on citizens’ rights, with “a high degree of convergence” on residence and social security and the rights of family members.
But there was still disagreement on “the specified cut-off date, future family reunion and the broader issue of compliance enforcement.”
He admitted the sides remain at odds over voting rights for Britons living in the EU and the issue of whether those currently residing there have any right to onward movement within the EU once we leave.
On the divorce bill, he said it was accepted the UK has obligations to the EU and the EU to the UK.
Papers published by the Government from next week, which lay the ground for the next round of talks, will cover Northern Ireland, availability of goods for the EU and UK and access to official documents post Brexit.
A second batch, to be released before the…