Exclusive: City unlikely to get more than “token, minimalist” Brexit deal
The UK is unlikely to get more than a “token, minimalist” deal on financial services included as part of the post-Brexit agreement with the EU in October, a senior City figure has said.
The source, who is privy to conversations with key players on both sides, told City A.M. that while services are likely to be referenced within the final deal, it will be “just a slightly uninspiring, lowest-common-denominator” inclusion that will result in “dramatically less” access than is currently enjoyed.
“They will say its the most comprehensive deal the EU has ever done on services with any third country and that will be true, but it will not only be less than we have through the Single Market, it will be dramatically less,” he said.
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Government figures including Brexit secretary David Davis, chancellor Philip Hammond and even Prime Minister Theresa May have pressed the case for its inclusion, but the red lines on both sides are so entrenched it makes the possibility of a breakthrough slim-to-none.
The EU is pushing for equivalence, which would leave the UK as a rule-taker. An “enhanced” approach – which could lean towards mutual regulatory alignment favoured in the City and Westminster – would still give the EU ultimate control to unilaterally withdraw access, which would leave the UK with diminished control.
Although there are individual member states who would back the UK – most visibly Luxembourg, whose economy is heavily dependent on a financial services in which the UK plays a critical part – there is still a sense that the Commission is, and will continue to, set the tone in negotiations. France, who has repeatedly described as “hostile” to the UK, remains a major antagonist in the negotiations, and one that is growing in strength in light of a weakened Angela Merkel.
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After transition and perspectives shift from the departure of a member state to how the EU deals with an important external partner, there may be an opportunity to revisit the issue. But “the problem then is how much business will have adapted their model,” the well-placed source said. “The prize is less good.”
Yesterday Brexit secretary David Davis told the WSJ CEO Council that the team was seeking "to develop a chapter" on services within the deal, which will be voted on by UK and EU parliaments.
A UK government spokesperson said: "The UK government has been clear in seeking a comprehensive and ambitious deal with the EU, which should cover financial services and protect the role of the City of London as a top global financial centre.
Read more: City hits back against EU's "improved equivalence" proposal
“We are confident of securing a good deal on financial services. The EU and UK start from the point of complete regulatory convergence, uniquely integrated financial markets, and an offer by the UK to maintain an appropriate level of regulatory coherence after Brexit."
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