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Brexit: UK banks will lose 'passporting rights' after Britain leaves EU, Michel Barnier says

Jon Stone

British banks will lose “passporting rights” to do business in the European Union after Brexit, the EU’s chief Brexit negotiator has said.

Speaking in Brussels on Monday, Michel Barnier said that “Brexit means Brexit” – and that there could be no opt-ins to parts of the single market for certain industries.

“On financial services, UK voices suggest that Brexit does not mean Brexit. Brexit means Brexit, everywhere,” Mr Barnier said in a major speech to a think-tank.

“The legal consequence of Brexit is that the UK financial service providers lose their EU passport. This passport allows them to offer their services to a market of 500 million consumers and 22 million businesses.”

The pronouncement is bad news for the City, where over 5,400 British firms rely on passporting rights to bring in £9bn in revenue every year to Britain. The British Bankers’ Association (BBA) has said the loss of passporting would be “disruptive, costly and time-consuming”.

It also comes the same day as the EU announces where it will relocating the European Banking Authority, an EU agency currently based in London, after Brexit.

The chief negotiator said the EU might judge some UK rules as “equivalent” to EU passporting rights, but ruled out the City of London having access to EU financial markets under the same passporting deal as now.

Mr Barnier told the audience at the Centre for European Reform: “Those who claim that the UK should pick parts of the single market must stop this contradiction. The single market is a package, with four indivisible freedoms, common rules, institutions, and enforcement structures.

“The UK knows these rules very well, like the back of its hand. It has contributed to defining them over the last 44 years with a certain degree of influence. We took note of the UK decision to end free movement of people, and this means clearly that the UK will lose the benefits of the single market.

Michel Barnier speaking at the Centre for European Reform in Brussels (CER)

“This is a legal reality; the EU does not want to punish, it simply draws the logical consequence of the UK’s decision to take back control.”

As well as ruling out a carve-out for the financial sector, Mr Barnier appeared to suggest there could be no special deal for the UK’s car manufacturers to stay in the single market, as proposed by industry bodies.

In the same speech, the senior EU official also expressed disappointment at what he suggested as a fixation in some British circles on “no deal” being a viable option for the UK.

“We have a shared history and this started long before the last 44 years. This is why the no deal is not our scenario, even though we will be ready for it,” he said.

“I regret that this ‘no deal’ option comes up so often in the UK public debate. Only those who want to ignore the current benefits of EU membership can say that no deal would be a positive result.”

Liberal Democrat leader Vince Cable said the decision was a “major blow” to the Government’s Brexit plans.

“Loss of this access risks blowing a hole in the budget at a time when our public services are already seriously underfunded,” he said.

“All of this could be avoided if the Government chose to stay in the single market.

“Instead, ministers seem intent on killing the golden goose by choosing an extreme form of Brexit that will seriously damage the financial sector.”