Political reporter(wp/es):
Ministers are moving towards a clear break from EU rules for the City, to protect it from damaging diktats from Brussels, the Standard reveals today.
They are increasingly wary of the dangers of the impact on the Square Mile of Britain being “law takers rather than law makers”.
This situation could leave the UK’s dominant financial sector at the mercy of backroom deals struck in Brussels — without Britain having a say — and secretly aimed at forcing banks to shift more of their business from London to Paris and Frankfurt.
Immediately after the June 23 vote, many City figures stressed how vital it was to achieve a “soft Brexit”.
They believed that preserving single market “passporting” rights was key to ensuring that financial firms would continue to be able to trade in the EU without barriers after Britain leaves the union.
However, a growing number in the Square Mile have more recently spoken out in favour of a “hard Brexit”, with a more drastic severing of ties with the European Union in order to ensure that Britain can decide its own financial rules and regulations.
Ministers believe it is too simplistic to boil down the decision to a “hard” or “soft” Brexit.
A senior source said that for different industrial sectors in Britain there was likely to be a different optimal outcome in the negotiations which will start after Theresa May triggers Article 50 next spring.
However, there is a growing belief in the Government that the risks for the City in giving up “control” over regulations outweigh the benefits of the “access” that would be guaranteed from doing so.
Instead of making concessions to cling on to single market “passporting”, a system based on a type of “equivalence” is gaining traction in senior government circles as a way of putting Britain in charge of laws governing the Square Mile while maintaining good access to EU markets.
“Unless exemptions can be agreed, the problem with single market passporting is that the UK would not have sovereign power over its financial regulation law, and part of a single market deal involves accepting the free movement of people,” said Lord Flight, a City veteran and former shadow Treasury minister.
He argued that a deal could see the UK ensuring “adequate equivalence”, which could mean abiding by overall agreed high standards rather than implementing every EU regulation.
Remaining in the EU customs union is also seen as difficult, given how it would hamper Britain’s bid to strike new trade deals around the globe after Brexit.
Mayor Sadiq Khan will meet Theresa May this week to urge her to press on with her plans for Brexit.
He also demanded today that she reconsider her decision to rule out London having a seat at the negotiating table. “Failure to have London round the table would put our world-leading financial service, tech and creative sectors at serious risk,” he said.
Different approaches during the Brexit talks could be taken for other sectors of the economy. Seeking to maintain very close ties to the EU could be in the best interests of car manufacturers, such as Nissan, which has a giant plant in Sunderland.
However, France and other EU car manufacturing nations will inevitably seek to lure more production across the Channel.
EU leaders may be reluctant to agree to a “pick-and-mix” Brexit pact. If one is not achieved, Britain could fall back on World Trade Organisation rules, but this is not being seen as a positive outcome in many corners of Whitehall.
Ministers are moving towards a clear break from EU rules for the City, to protect it from damaging diktats from Brussels, the Standard reveals today.
They are increasingly wary of the dangers of the impact on the Square Mile of Britain being “law takers rather than law makers”.
This situation could leave the UK’s dominant financial sector at the mercy of backroom deals struck in Brussels — without Britain having a say — and secretly aimed at forcing banks to shift more of their business from London to Paris and Frankfurt.
Immediately after the June 23 vote, many City figures stressed how vital it was to achieve a “soft Brexit”.
They believed that preserving single market “passporting” rights was key to ensuring that financial firms would continue to be able to trade in the EU without barriers after Britain leaves the union.
However, a growing number in the Square Mile have more recently spoken out in favour of a “hard Brexit”, with a more drastic severing of ties with the European Union in order to ensure that Britain can decide its own financial rules and regulations.
Ministers believe it is too simplistic to boil down the decision to a “hard” or “soft” Brexit.
A senior source said that for different industrial sectors in Britain there was likely to be a different optimal outcome in the negotiations which will start after Theresa May triggers Article 50 next spring.
However, there is a growing belief in the Government that the risks for the City in giving up “control” over regulations outweigh the benefits of the “access” that would be guaranteed from doing so.
Instead of making concessions to cling on to single market “passporting”, a system based on a type of “equivalence” is gaining traction in senior government circles as a way of putting Britain in charge of laws governing the Square Mile while maintaining good access to EU markets.
“Unless exemptions can be agreed, the problem with single market passporting is that the UK would not have sovereign power over its financial regulation law, and part of a single market deal involves accepting the free movement of people,” said Lord Flight, a City veteran and former shadow Treasury minister.
He argued that a deal could see the UK ensuring “adequate equivalence”, which could mean abiding by overall agreed high standards rather than implementing every EU regulation.
Remaining in the EU customs union is also seen as difficult, given how it would hamper Britain’s bid to strike new trade deals around the globe after Brexit.
Mayor Sadiq Khan will meet Theresa May this week to urge her to press on with her plans for Brexit.
He also demanded today that she reconsider her decision to rule out London having a seat at the negotiating table. “Failure to have London round the table would put our world-leading financial service, tech and creative sectors at serious risk,” he said.
Different approaches during the Brexit talks could be taken for other sectors of the economy. Seeking to maintain very close ties to the EU could be in the best interests of car manufacturers, such as Nissan, which has a giant plant in Sunderland.
However, France and other EU car manufacturing nations will inevitably seek to lure more production across the Channel.
EU leaders may be reluctant to agree to a “pick-and-mix” Brexit pact. If one is not achieved, Britain could fall back on World Trade Organisation rules, but this is not being seen as a positive outcome in many corners of Whitehall.
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