Hammond – sceptics are wrong to say banks can’t be in Brexit deal
LONDON (Reuters) – British Chancellor Philip Hammond will tell the European Union on Wednesday that it must drop its tough stance on the City of London and allow financial services to be part of Britain’s post-Brexit trade deal with the bloc.
Brussels has so far refused to let Britain pick and choose the parts of the EU’s single market to which it can continue to have free access, chief among them the United Kingdom’s large financial services industry.
But Hammond will say the bloc had sought to include financial services in other trade deals in the past and it made no sense to exclude them from the Brexit deal that London and Brussels are due to hammer out in the coming months.
“It is time to address the sceptics who say a trade deal including financial services cannot be done because it has never been done before,” he was due to say in a speech on Wednesday, excerpts of which were released to the media on Tuesday.
“To them I say every trade deal the EU has ever done has been unique. The EU has never negotiated the same arrangement twice,” Hammond said, pointing to the bloc’s trade deals with Turkey, Canada, Singapore, South Korea and Switzerland.
A stand-off between Britain and the EU over the future access to the bloc’s single market for London’s vast financial services industry is shaping up to be one of the key Brexit battlegrounds before Britain leaves the bloc in March 2019.
Financial services account for over a tenth of British economic output and the industry says it contributed 72.1 billion pounds ($100 billion) in corporate and employee taxes to the government last year.
Hammond said Brussels had originally aimed to include financial services in a free trade deal with Canada which in the end failed to provide much new market access for banks.
The EU had also wanted to include the sector in the now stalled talks for a broad trade and investment deal with United States, Hammond said.
“At the time, people rightly argued that this was a challenging objective. But it need not be so in a partnership between the UK and the EU,” he said. “Our markets are already deeply interconnected.
“So I am clear not only that it is possible to include financial services within a trade deal, but that it is very much in our mutual interest to do so.”
British Prime Minister Theresa May said in a speech on Friday that a deal on financial services could and should be part of Britain’s new relationship with the EU.
May said London wanted to keep cross-border trade in financial services on the condition that each side preserved similar regulatory standards, echoing a proposal made by Britain’s finance industry.
However, the EU has already said such a plan is not acceptable.
On Tuesday, France said there was little chance of securing a free trade deal for financial services that would provide the degree of access sought by the sector.
French economy minister Bruno le Maire instead said finance companies may have to rely on what it known as equivalence. The legal mechanism allows countries from outside the EU to access the single market in limited circumstances but access is patchy and can be revoked at short notice.
“Financial services cannot be in a free trade agreement … we have to rely on equivalence regimes, that is the best solution for financial services,” le Maire told BBC radio, citing the need for stability and supervision in the sector.