May Says EU Will Learn It Needs City of London: Brexit Update

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The U.K. can’t have an "a la carte" transition, Barnier said during a news conference in Brussels.

Theresa May is giving evidence to Parliament’s most powerful panel of politicians: the Liaison Committee. This group is made up of the chairs of all the specialist select committees in the House of Commons and has the ability to ask May any question about her remit as head of the U.K. government.

The prime minister has spent the early part of the session explaining her plans for the next phase of Brexit talks. Earlier in the day, Bank of England Governor Mark Carney addressed lawmakers before the Treasury Committee, and EU chief Brexit negotiator Michel Barnier held a press conference. 

Here are the latest developments, updated throughout the day. Time-stamps are London time.

May Says EU Will Learn it Needs City of London (3.30 p.m.)

May said the next phase of Brexit talks will convince the EU that it needs the City of London financial district to remain strong as she committed to fighting to protect its status as a global finance center.

“The City of London is actually the banker for Europe. It’s a significant provider of capital finace for Europe," May told the committee, citing an argument made by Carney. “As we come into discussion there will be greater recognition of the role that the City plays.”

May also insisted she can finalize the free trade agreement she wants with the EU before the U.K. leaves the lock in March 2019. Despite warnings from Brussels that this is unrealistic, May said she’s confident a quick deal can be done because the U.K. and the EU already share the same regulations and tariff regimes.

Bank of England Governor Weighs In Too (3:01 p.m.)

Progress in Brexit talks means that the central bank is holding off forcing most European banks to become subsidiaries. Mark Carney told lawmakers that making lenders and insurers go through the process -- only to then reverse course later -- would be costly and disruptive. “Now is not the time that one has to say glass half empty, we’re never going to get a deal,” Carney said.

Read the full story here.

May Heads Off Rebellion by Accepting Amendment (1:20 p.m.)

May headed off a rebellion by pro-EU lawmakers in her Conservative Party over plans to write the date of leaving the EU into law. There was the risk of a repeat of last week’s defeat for the EU withdrawal bill in the House of Commons if she pressed ahead with a government plan to set March 29, 2019 as the impermeable day Britain leaves the bloc.

She said at her weekly question and answer session in the House of Commons on Wednesday that she will accept a compromise amendment that would give ministers, with parliamentary approval, the power to change the date if necessary.

“We’re talking about the shortest possible time for this, should it be used,” she said, in a bid to reassure pro-Brexit lawmakers that Britain will still leave the bloc on schedule. “We are going to leave on March 29, 2019.”

May is trying to push through Parliament a key piece of Brexit legislation that will transfer EU law onto the U.K. statute books, a task rendered difficult by the fact that she lost her majority and relies on a handful of Northern Irish lawmakers to pass legislation.

Later today, members of Parliament will vote on setting the date for Brexit and the last thing the government wants is the embarrassment of a second defeat.

May Insists City of London Will Still Reign (12:38 p.m.)

Dressed in blue, and flanked by her top ministers, May faced political rival Jeremy Corbyn one last time before the Christmas break. While the EU’s chief Brexit negotiator explicitly ruled out a special deal for Britain’s financial services sector, the prime minister disagrees with him.

She pointedly remarked that Barnier had made a number of comments of late.

"We value the important role that the City of London plays -- not just as a center for Europe but as a financial centre for the world. We want to retain that and maintain that,” May responded in answer to a question about whether banks would lose key rights.

"We’re very clear, and the BOE and indeed the Treasury have been setting out today reassurance to ensure that banks will be able to continue to operate and will be able to continue to ensure the City of London retains its global position,” she said.

“But this of course will be part of the phase 2 negotiation of Brexit,” she added. For the U.K. government it’s all still up for negotiation.

U.K. Future EU Links Should be Set Out In 2019 (11:55 a.m.)

While the EU doubts the U.K.’s claim that it can wrap up a full-blown trade deal with the bloc before it leaves, Barnier said he hoped that many details could be agreed in that time.

“When the transition starts” in March 2019, “we’ll know exactly what the transition is a transition toward,” Barnier told reporters in Brussels.

The EU is expecting to publish a “political declaration” outlining what sort of arrangements the two sides will have from 2021 when the transition period ends, based on the negotiations between now and then.

It gives hope to the U.K. that the EU is ready to start working on the future relationship even as other aspects of the Brexit negotiations haven’t been completed. It can live with a bit of flexibility if it means the rebels will stand down.

But Barnier wouldn’t be drawn on how detailed the declaration would be and remained insistent that the U.K. couldn’t expect a deal better than the trade arrangements struck between the EU and Canada, Japan and South Korea.

Barnier Continues to Put Up Limits to the U.K. (11:21 a.m.)

The U.K. will remain subject to all the European Union’s rules during a transition period that will probably last through 2020, EU chief Brexit negotiator Michel Barnier spelled out in Brussels.

“The transition period is useful and will enable the public administration in Britain to prepare themselves for the kind of challenges they will have to face,” Barnier told reporters Wednesday, as he published the EU’s position on the transition to be presented to the British government next month.

Businesses “need to adapt once, at the end of the transition period; of course they need to start preparing for this right now,” he said.

Gove: U.K. May End Up on WTO Terms for a Bit (10:50 a.m.)

U.K. Environment Secretary Michael Gove told lawmakers on parliamentary panel on Wednesday that the U.K. may end up on WTO terms for a period after Brexit.

“Indeed there’s a chance, though we’re doing everything we can to prevent it, that we might end up trading with EU, at least for a period, on WTO terms,” he said.

Lagarde Defends IMF’s Brexit View (10:00 a.m.)

Christine Lagarde defended the International Monetary Fund’s gloomy predictions about the impact of Brexit, saying the economy’s slowdown over the past year shows those warnings were correct. Speaking in London, she noted that the U.K.’s performance has been a “bit of a disappointment” given the upgrades to many other advanced economies this year.

BOE says Brexit Making it Harder to Find Workers (09:30 a.m.)

Warnings that Brexit will hit the labor market may be coming to pass. European workers are showing signs of turning away from the U.K. as an employment destination, according to a Bank of England report. While jobs requiring less expertise were still easier to fill, some firms reported that even those had become more difficult, “notably those that relied heavily on seasonal workers, for example in horticulture and agriculture.”

Earlier:

The centuries-old dispute over Gibraltar bubbled up overnight, with British officials fearing Spain will threaten to veto a Brexit transition phase if the British prime minister refuses to negotiate a separate deal with the government in Madrid over the rock at the southern tip of Spain.

Coming Up:

  • Dec. 20: Brexit Bill returns to the House of Commons for the eighth day of detailed scrutiny. But May seems to have found a compromise that will see her avoid further defeats
  • Dec. 20: At 3:15 p.m., May will give evidence to Parliament’s Liaison Committee, which will ask her about the Brexit negotiations and the transitional arrangements she intends to secure

— With assistance by Svenja O'Donnell, and Alex Morales

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