- A lobby group for UK banks want the government to seek a Brexit deal that includes financial services so the UK can maintain its position as the financial hub of Europe.
- Brexit secretary David Davis says the UK can have a “Canada plus plus plus” trade deal with the EU that includes services.
- But no non-EU member state has ever negotiated trade terms with the EU that extend to financial services.
LONDON – UK banks have written to Theresa May to warn that a Canada-style trade deal with the EU will not go far enough because it would not cover financial services.
Brexit secretary David Davis last week said the UK can have a “Canada plus plus plus” trade deal with the EU after Brexit. It would involve “Canada plus the best of Japan, the best of South Korea and that the bit that is missing, which is the services,” Davis said.
The open letter from UK finance, sent on Sunday, said the Canada-EU deal was an “interesting template” but the government should seek a deal which includes financial services so that the UK can maintain its position as the financial hub of Europe.
“CETA [the Comprehensive and Economic Trade Agreement between Canada and the EU] is an interesting template, but given the UK and the EU 27 start with a position of regulatory convergence that the UK and Canada didn’t, we should seek to be far more ambitious,” the letter said.
CETA – still subject to formal ratification by the EU – will eliminate 98% of the tariffs between Canada and the EU if it comes into force, but does not include any alignment on financial services.
A failure for the UK to organise a deal including services would likely see it lose its European financial passport, a set of rules and regulations which allow UK-based finance firms to trade with and sell their services into Europe. Many non-EU lenders use the passport to operate a hub in the UK and then sell services across the 28-nation bloc.
No non-EU member state has ever negotiated trade terms with the EU that extends to financial services.
Citi Bank warned last week that the UK faces a “binary” choice between remaining in the EU single market or leaving with a narrow trade deal that excludes services.
The letter from UK Finance, a lobby group which represents Britain’s financial sector, also called on Prime Minister May to focus on organising a transition deal that will avoid a “cliff-edge” for UK firms.
“The proposed solution which involves extending the application and legal effect of the EU ‘acquis’ in the UK for a time-limited period is sensible and would provide an orderly transition,” UK Finance wrote in the letter.
“For the trillions of euros in current financial services contracts between the EU and the UK, a sensible transition agreement would help minimise disruption.”
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.