Britain is on the cusp of an historic new deal with the European Union as hopes rose among negotiators that the last big obstacle to an agreement can be removed.

While the final talks are likely to go the wire ahead of next Friday’s summit European and UK sources said there was increasing optimism on both sides over the UK’s inclusion in the EU’s protectionist Made In Europe law.

Andy Burnham has made this a priority amid warnings the law could badly damage the British economy by excluding industries such as carmaking from lucrative European contracts and subsidies.

Made in Europe is a new law, yet to be enacted, designed to protect EU companies – mainly from China – by giving them priority in state contracts.

It is a stumbling block because EU countries want cheaper tuition fees for their nationals who will study at UK universities under the new deal – at the moment they pull full international fees – and are insisting that agreements signed off next Friday are not implemented until a deal on fees is made.

‘We are making real progress’

The UK is believed to be using the fees issue as a bargaining chip for inclusion in the Made in Europe scheme.

Now a senior UK official involved in the negotiations reported encouraging signs of flexibility in Brussels on the protectionist policy.

“I do think that we are making real progress on this stuff,” he said, arguing that Europe’s industrial supply chains were too closely intertwined to justify erecting fresh barriers. “There is a real winning outcome for both sides. There is also obviously a big lose-lose possibility.”

European companies themselves had been among the strongest advocates of keeping Britain involved, he added, particularly in the automotive sector.

In Brussels, officials underline that Made In Europe has been tailored to include the UK, although the final shape of the legislation could still take months to hammer out.

“Britain is almost certain of inclusion,” said one EU diplomat. “It already has provisions to allow the UK to take part. We want to include the UK in this – and we know how much it could mean to them.”

Another EU source said UK inclusion in Made In Europe was all-but-guaranteed, as long as it follows through on an offer to lower tuition fees and agrees to Brussels’ demands to hike tariffs on Chinese electric vehicles (EVs) to avoid Britain being a “backdoor” to the European market the policy is designed to protect.

A UK Government source said the deal is “95 per cent done”.

Three agreements close to being settled

Negotiators are close to settling three agreements covering food trade, carbon emissions and under-30s migration – or youth experience – raising hopes that Prime Minister Andy Burnham can emerge from the November 20 summit with a significant breakthrough in his efforts to repair relations with Brussels.

EU ambassadors met again on Wednesday to consider the draft joint declaration, with some member states still pushing for the UK to make a major concession by committing to lowering tuition fees for European students now, rather than wait six months so the issue can be discussed alongside Made In Europe.

Several EU governments are also insisting that the three agreements should not take effect until the tuition fee question is settled, even if the negotiations themselves are concluded at the summit, a position that has not yet been directly tested with UK negotiators.

A new point of tension has also emerged, with the two sides struggling to agree on how much of a role the UK will get in shaping decisions on EU laws which it will be forced to adopt under the food trade deal in return for easing trade – so-called “dynamic alignment”.

The immediate challenge is to find wording acceptable to all 27 EU governments and London, allowing the summit to deliver a political breakthrough without pretending every outstanding issue has been resolved.

We’ll always protect British interests, says PM – and more European students benefit both sides

Andy Burnham has said that British and European negotiators have “long nights ahead” over the next week to finalise a Brexit reset deal before next Friday’s UK-EU summit.

Speaking to journalists at the European Political Community Summit in Dublin on Thursday, the Prime Minister said he had had a “good day” with European leaders, including the President of the EU Commission, Ursula von der Leyen, whom he met for private talks.

However, he added: “We’ve got a big week ahead of us. You know, the deal is not done. There’ll be some long nights ahead in the next seven days.

Burnham said he was “hopeful” of reaching a deal next week. “We’ve made a really strong case, but we’ve had a good hearing as well,” he said.

On the issue of British access to the EU’s Made in Europe protectionist scheme, the Prime Minister suggested that the UK was on the same page as the continent when it came to the economic threat of cheap Chinese imports.

Brussels has been demanding that the UK increase its tariffs on Chinese cars to the EU level to get access to the scheme.

Burnham said: “On Made in Europe, Europe’s issue is Britain’s issue, which is obviously particularly imports from China causing the problem.”

Asked whether he was prepared to give EU students lower tuition fees as part of the deal, Burnham said that agreeing a “package” is “how deals are done”.

He also said Britain would benefit from having more students from Europe at UK universities, after numbers dropped significantly post-Brexit.

“Obviously, we’ll always protect the British interest in this, but it is also in our interest, I think, to have more young people coming from Europe again to study at our universities, because that, in the end, benefits both sides,” he said.