In 1940, as Swedish plenipotentiary, he was involved in discussions with British government officials exploring a compromise peace with Nazi Germany.

On 17 June 1940, Prytz had a meeting with the British Foreign Office Minister Rab Butler, at which the possibility of Britain making a compromise peace with Nazi Germany was discussed.

Prytz reported back to Stockholm that Butler, after consulting with Foreign Secretary Lord Halifax, had declared that British policy must be determined by "common sense not bravado" and that "no opportunity for reaching a compromise (peace) would be neglected if the possibility were offered on reasonable conditions.

Churchill wrote to Halifax on 26 June 1940, complaining that Butler's "odd language", hinted at defeatism and embarrassed the British government.

Butler, made a four-page handwritten reply the same day, claiming that he had kept to the official British line and had said "nothing definite or specific that I would wish to withdraw", and offering to resign.