U.K. Thinks Barnier Bluffing on No Brexit Deal for Banks

Updated on
  • Officials said to believe London banks will get market access
  • Barnier has ruled out financial services in free trade pact

May Ready To Call Barnier's Bluff on Financial Services

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Prime Minister Theresa May believes Michel Barnier is bluffing when he says there will be no special deal for financial services, officials said, as the U.K. prepares to negotiate its post-Brexit ties with the European Union.

Two senior officials familiar with the matter privately think the EU’s chief Brexit negotiator is faking a hard-line stance in ruling out a deal that would allow banks to continue operating freely across the bloc. 

Talks have yet to start on Britain’s future trade agreement with the EU but Barnier said last month there was no chance of a deal that replicated the easy access that U.K.-based financial services currently enjoy to the single market.

The U.K. officials said the French former commissioner was simply setting out an opening position that did not have backing from the 27 other EU member countries. They said banks based in London will be fine because businesses operating in the EU will need to maintain access to finance after Brexit.

The fate of London’s financial district is urgent for May, who last month agreed to pay a 39-billion-pound ($53 billion) bill to start talks on the nuts and bolts of a transition. With Britain’s departure from the bloc just 14 months away, businesses are counting on a two-year adjustment period.

Britain’s May to EU: You Need Our Banks as Much as They Need You

TheCityUK, an industry body, estimates that it employs more than 2.2 million people and contributes nearly 11 percent of economic output. Banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. are preparing to move staff from London and businesses are taking decisions in the first quarter of 2018 about post-Brexit relocations.

Meanwhile, the Financial Times reported that the U.K. government is concerned by a French-backed move to limit access for British-based fund managers to EU funds. President Emmanuel Macron’s goal, the paper said, is to win a slice of the asset management business for Paris.

Last month, May said U.K. financial services should be optimistic about Britain’s trade talks, which are due to start in March. She cited Polish Prime Minister Mateusz Morawiecki and Italian Prime Minister Paolo Gentiloni as evidence that other EU leaders are open to Britain carving out a custom-made trading relationship with the bloc that covers services.

Yet Barnier insists the U.K. will not be offered anything more than a Canada-style deal, which keeps tariffs to a minimum on goods but does not include trade in services. He says this is a result of May’s red lines, including her decision to leave the single market in order to regain control over immigration from the EU.

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