Denying City a trade deal ‘will backfire on EU’

attempts to exclude the City of London from a Brexit trade deal will backfire on the eU, Brussels was warned yesterday.

In a defiant message, senior tories said cutting off Britain’s square mile risked damaging ‘hard-earned financial stability’.

the broadside from philip Hammond and David Davis was aimed at cracking Brussels’ hard-line negotiating stance. It came just hours after the eU’s chief Brexit negotiator michel Barnier reiterated that the City would not be offered a special deal as part of talks.

Both Chancellor mr Hammond and mr Davis, the Brexit secretary, insisted that a deal on financial services is an essential British demand as part of a trade agreement.

as the ministers arrived in munich to lobby leading German business chiefs, they warned that excluding UK banks could needlessly expose the bloc to harm.

Writing in Germany’s Frankfurter allgemeine newspaper, they called for both sides to ‘re-double our collective effort to ensure that we do not put that hard- earned financial stability at risk’.

they said any deal should support ‘collaboration within the european banking sector, rather than forcing it to fragment’. Faced with growing pressure from City bosses to secure an agreement, the senior tories hinted that the UK was willing to design a system that would mirror eU financial regulations after the split.

Both mr Hammond and mr Davis urged Brussels to use ‘imagination and ingenuity’ in preventing the creation of trade barriers. they said any deal should be ‘the most ambi-

‘Extraordinary co-operation’

tious in the world’ and take into account ‘the extraordinary levels of interconnectedness and co- operation that already exists’.

‘It makes no sense to either Germany or Britain to put in place unnecessary barriers to trade in goods and services that would only damage businesses and economic growth on both sides of the Channel,’ they wrote. speaking in Brussels last night, however, mr Barnier reiterated the eU’s hard-line position but offered hope by suggesting the City could work with the eU by matching its notoriously complicated regulations.

a so- called ‘ equivalence’ scheme would still fall short of the ‘passporting’ system that currently allows the City access to the eU. mr Barnier said: ‘this is not a question of punishment or revenge; we simply want to remain in charge of our own rules and the way in which they are applied.’

He added: ‘Let’s not have a short memory. the financial crisis is not so long ago. It cost us dear. It destroyed value and millions of jobs and caused much social pain.’

mr Barnier insisted that theresa may’s ‘ red line’ demands, such as leaving the jurisdiction of the european Court of Justice, were to blame for the limited nature of a deal. He said: ‘By officially drawing these red lines, the UK is itself closing the doors, one by one.’ He also appeared to taunt the UK by last night warning companies to start preparing for ‘friction’.

However, ministers are convinced the negotiator will be forced to backtrack when initial talks on trade unfold this month and he is faced with pressure from eU member states to reach a good deal.

the City of London’s eU envoy Jeremy Browne last night said fears of a mass exodus of bankers after Brexit had been heavily over-played.

Initial claims said the move could cost up to 75,000 jobs. But mr Browne said: ‘It may end up for quite a lot of them being a bit less dramatic than it might appear. I don’t think they’re saying, “shall we abandon London?” ’