Philip Hammond, Chancellor of the Exchequer, and David Davis, the Brexit Secretary, yesterday promised a group of City leaders a smooth and orderly transition for Britain when it leaves the EU. The promise comes in the wake of mounting pressure by financial industry leaders, including Mark Carney, Bank of England governor, who have repeatedly called for an interim deal to cover the period between Brexit, due to occur by March 2019, and the introduction of new financial trading arrangements, which are unlikely to be agreed for several more years.
However, Mr Hammond and Mr Davis also warned the group, which comprised leading City figures including the chairmen of Santander and Barclays and the CEO of Lloyd’s of London, that despite the City accounting for nearly 12% of the UK’s GDP, the financial and professional services will not get any special treatment in the upcoming negotiations.
This warning will cause a measure of concern to the industry, as it could mean the UK will not seek to comply strictly with EU finance rules, meaning that banks and other firms will not be able to keep trade passports which allow them to trade freely across the Eurozone on a single authorisation. During the meeting Mr Hammond and Mr Davis discussed the options for a post-Brexit regime in the City. One of the favoured options would be based on regulatory equivalence, whereby British banks and other financial institutions would be granted third-party passports to trade across the EU, rather than having the passports currently issued because Britain is in the single market.