U.K. Says Finance a Brexit Priority as Remainers Join Forces

Updated on
  • Trade Minister Greg Hands says passporting will be ‘key part’
  • Cross-party lawmakers call for U.K. to stay in single market

The U.K. government will make banks’ access to the single market a priority in Brexit talks, International Trade Minister Greg Hands said, as cross-party groups joined forces to make the case for as little disruption to the economy as possible once Britain leaves the European Union.

“There is no doubt that access to EU markets for financial-services firms based in the U.K. will be a key part of future negotiations,” Hands said at a conference at Bloomberg LP’s European headquarters in London on Monday. The U.K. will seek a deal that “promotes and protects our strongest sectors, such as professional and financial services, automotive and aerospace.”

The U.K. government has given banks mixed messages on where financial services rank on its priority list for Brexit talks, while European policy makers have resisted suggestions that U.K.-based lenders should be allowed to keep the so-called passporting rights that permit them to sell services across the bloc. As Prime Minister Theresa May reaches out to her EU counterparts ahead of formal negotiations due to begin by April, divisions are deepening over what the U.K.’s post-Brexit future should look like.

Rupert Harrison, a former U.K. Treasury official, said Britain is heading into a “crunch time” as it would be best to secure a transitional agreement before the government starts formal exit talks. Waiting longer would leave the rest of the EU with more power at the negotiating table and potentially leave banks and other businesses moving activity abroad, he said.

“The argument is overwhelming for agreeing a transitional deal before triggering Article 50,” said Harrison, now chief macro strategist at BlackRock Inc. “The alternative is quite a hard stop.”

Carney Critic

Brexit campaigner and former justice secretary, Michael Gove, accused Bank of England Governor Mark Carney of trying to stall the process by seeking such a transitional deal for business. Carney has held private meetings and dinners with executives to gain support for a plan to let British companies remain in the single market for at least two years after Brexit, The Sunday Times reported. A Bank of England spokesman declined to comment.

Stepping up the case for keeping close ties to Europe, senior pro-EU lawmakers from the three main parties united on Monday to argue that the U.K. should remain in the single market or risk damaging the whole economy.

While politicians from all parties who backed “Remain” in the June referendum have largely accepted the verdict of the public, many are now trying to ensure that Brexit is carried out in a way that retains as close a link to the EU as possible. May has signaled immigration controls are a priority of her strategy, which her European counterparts say is incompatible with staying in the single market.

Polish Outreach

“We need to stop throwing rocks at each other and we need to build a smooth pathway on solid foundations as we begin this process of leaving the EU,” said former Business Minister Anna Soubry, a Conservative who campaigned for Remain. “It is critically important that we do put forward the evidence about the importance of the single market to British business.”

May will host her Polish counterpart, Prime Minister Beata Szydlo, in London on Monday as part of a charm offensive before she triggers formal negotiations by the end of March. May, who faces the first electoral test of her management of Brexit in a special election in west London on Thursday, has set a goal of holding one-to-one talks with all 27 EU leaders before a two-day EU summit on Dec. 15.

European Central Bank President Mario Draghi, in testimony to European Parliament lawmakers in Brussels on Monday, warned that the U.K. economy would be the first to suffer if its decision to quit the EU leads to protectionist measures.

“If, in the long run, the risk of a less-open U.K. economy in terms of trade, migration and foreign direct investment were to materialize, there would be a negative impact on innovation and competition and, thus, productivity and potential output,” Draghi said. “Such developments would first and foremost weigh on the U.K. economy.”

— With assistance by Ian Wishart, Simon Kennedy, Andrew Atkinson, Thomas Penny, Piotr Skolimowski, and Kit Chellel

(Updates with Draghi in final two paragraphs.)
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