Hammond to warn EU over financial services

Chancellor to warn that failure to include sector in Brexit trade deal will harm both sides’ interests

Philip Hammond will today warn the EU that it will be harming its own interests if it refuses to include financial services in a Brexit deal with the UK. The Chancellor will challenge Brussels’ insistence that financial services – which make up £96billion of British exports – cannot be part of a future free-trade agreement.

PHILIP HAMMOND will today warn the EU that it will be harming its own interests if it refuses to include financial services in a Brexit deal with the UK.

The Chancellor will challenge Brussels’ insistence that the crucial sector – which make up £96billion of British exports – cannot be part of a future free-trade agreement between the UK and the EU in a major speech on Brexit.

Prices for financial services will go up on both sides of the Channel if a deal does not include loans, car finance and other everyday transactions, Mr Hammond will say.

He insists every trade deal the EU has ever struck has been unique and that a bespoke arrangement between the UK and the EU on financial services is “very much in our mutual interest”.

It comes as the European Council prepares to publish its negotiating guidelines on the future trade deal today. The Daily Telegraph understands that the council has toned down the document – which has been delayed by 24 hours – to remove any reference to a Canada-style agreement.

Theresa May has repeatedly said she does not want a duplicate of the EU’S trade deal with Canada, and Donald Tusk, the president of the council, has ordered references to Canada to be removed to avoid a row with Britain.

Mr Hammond, arguably the most Europhile member of the Cabinet, will use his speech in London to prove he believes in Brexit. He will say: “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.

“To them I say, every trade deal the EU has ever done has been unique. The EU has never negotiated the same arrangement twice.”

Referring to bespoke relationships with Turkey, Canada, Singapore, South Korea, Switzerland and others, Mr Hammond will say that “our economies, including in financial services, are interconnected, our regulatory frameworks are identical, and our businesses and citizens depend on crossborder financial services trade in their day-to-day lives, when they buy a car or take out a fixed-rate loan or hedge their fuel costs”.

He will point out that the EU itself pursued ambitious financial services cooperation when it struck trade deals with the US and Canada, and that “we can do much better” because Britain and the EU start from a position of regulatory alignment.

“If it could be done with Canada or the USA, it could be done with the UK – the EU’S closest financial services partner by far,” he will say. Mr Tusk’s guidelines are expected to be vague to put pressure on Mrs May to give more detail on what she wants from a trade deal.

But Guy Verhofstadt, the European parliament’s Brexit coordinator, and Antonio Tajani, the president of the parliament, are expected to unveil their own, more generous proposal for a deal later in the day.

MEPS plan to steal a march on the European Council by debating and voting on the non-binding resolution next week, before the draft guidelines are agreed by the EU27.

It is likely to call for a more flexible and special deal for Britain than that backed by the commission so far.