The City of London will get “appropriate” access to European markets after Brexit – but only on terms dictated by the trading bloc.
While the apparent concession is a nod to the influence and value of the UK financial services sector, it falls far short of the expectation expressed by British ministers.
Chancellor Philip Hammond, Brexit secretary David Davis and the prime minister Theresa May have all said that a Brexit deal should include the finance sector.
However, Europe’s chief negotiator, Michel Barnier has insisted there was no place for “cherry picking” what areas of the customs union or single market the UK could stay part of – and that included financial services in any free trade agreement.
Now, it seems there has been a softening of that position – albeit with caveats.
In guidelines published earlier this week, the EU said: “Regarding financial services, the aim should be reviewed and improved equivalence mechanisms, allowing appropriate access to financial services markets, while preserving financial stability, the integrity of the single market and the autonomy of decision making in the European Union.”
Britain’s future access will depend on so-called “equivalence” arrangements – basically, offering the UK the same level of access and rights that other non-EU nations get.
The document adds: “Equivalence mechanisms and decisions remain defined and implemented on a unilateral basis by the European Union.”
Miles Celic, chief executive of TheCityUK, said the development was encouraging but that the best option remained mutual regulatory recognition
He added: “The EU has come a long way from its stance before Christmas when we were told a deal encompassing financial services was impossible. Now it is actively seeking ways to include financial services in the deal.”
Earlier this month, chancellor Hammond warned the “real beneficiaries” of any loss of market share in London would not be financial centres on the continent, but the likes of New York, Singapore and Hong Kong.
He said the City of London was a “European asset”, and any trade deal which undermined it would backfire on the EU.
“This is not a zero-sum game where any loss of market share in London is automatically a gain to another EU capital,” he said.