It is “very much in our mutual interest” for the EU and U.K. to secure a trade deal that includes financial services, U.K. Chancellor Philip Hammond will argue in a speech on Brexit on Wednesday.
Leading EU figures — including chief Brexit negotiator Michel Barnier, and most recently French Economy Minister Bruno Le Maire — have said financial services access cannot be included in a trade deal. But Hammond’s speech tomorrow will counter what he put as the view of “sceptics.”
“It is time to address the sceptics who say a trade deal including financial services cannot be done because it has never been done before … to them I say ‘every trade deal the EU has ever done has been unique,’” Hammond will say according to a section of the speech pre-briefed to the media.
He will also point out that previously, the EU has pushed to include financial services in trade deals with, for example, the U.S. In that case, the EU’s proposal called for strong cooperation on rules, though stopped short of measures for wide-scale cross-border sale of services.
However, Hammond will highlight that the U.K. starts from the unique position of already having the same rulebook as the EU.
“At the time, people rightly argued that this was a challenging objective … but it need not be so in a partnership between the U.K. and the EU. Our markets are already deeply interconnected,” he is expected to say.
Once the U.K. leaves the single market, firms will lose their “passporting” rights, which allow them to sell services across member countries. Instead, the EU’s “equivalence” framework will apply, which unilaterally gives limited access on the basis that rules are similar enough, and can be withdrawn.
In her speech last week, Prime Minister Theresa May accepted the loss of passporting rights but called for broad financial services access instead to be included in the trade deal, facilitated by mutual recognition of rules and a dispute resolution mechanism to manage divergence.