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Michel Barnier: UK should not 'kid themselves' over the City's access to EU markets after Brexit

3 min read

British ministers should not "kid themselves" about the level of access to EU markets that the City of London will have in any post-Brexit trade deal, Michel Barnier has declared.

The EU's chief Brexit negotiator pushed back almost immediately after Chancellor Sajid Javid vowed to press for so-called 'equivalence' between the UK and EU financial sectors on "day one" of the two sides' striking up a new trade relationship.

Brussels uses 'equivalence' tests to weigh up whether banking rules in a country it is trading with are up to the same standard as its own regulations.

British ministers are eager to ensure that the UK's £127bn financial services sector is able to do business as easily as possible across the bloc. 

Writing for City AM, Mr Javid said he would be pushing for the two sides to "work together in pursuit of common interests".

And he said: "As we leave the EU with the same rules, achieving equivalence on day one should not be complicated...

"If the EU, like us, wants a durable relationship, we should also include measures to directly address the long-term needs of industry for a reliable equivalence process. This would provide the certainty on which internationally mobile businesses can depend."

A leaked document seen by the Financial Times meanwhile made clear that the UK government would push for a "permanent equivalence" regime for financial services that will last for "decades to come" in a bid to shore up the City of London.

But Mr Barnier told the European Parliament that the UK could not expect "open-ended" accesss from Brussels now that it has quit the EU.

"Wherever possible we will grant equivalence on particular sectors of the financial industry," he said. "That is what we did with Canada, that’s what we do with the United States and Japan, and it works. So I don’t see why it shouldn’t work with the United Kingdom.

"And I would like to take this opportunity to make it clear to certain people in the United Kingdom ... that they should not kid themselves about this. There will not be general, open-ended, ongoing equivalence in financial services ... We will keep control of these tools and we will retain a free hand to take our decisions."

The rebuke from Mr Barnier comes amid suggestions that the bloc will demand concessions from the UK on access to its fishing waters in exchange for greater freedom for financial services. 

Both the UK and EU made their opening pitches ahead of talks on post-Brexit ties last week, with Mr Johnson pitching the UK as a champion of global free trade against a rising tide of protectionism and arguing that Britain will not need to align with a host of European rules and standards to land a deal.

Responding to that speech on Tuesday, European Commission president Ursual von der Leyen told members of the European Parliament: "The Prime Minister, Boris Johnson, whom we respect, said that in leaving the European Union the UK was not leaving Europe. We welcome that resolve. 

"The question that arises, for which we have no reply up until now, is this; it’s a fairly simple, but a rather serious question: the United Kingdom is leaving the European Union, the single market and the customs union - does it also wish to leave, or move away, from our economic and social model, from the European regulatory model it’s very familiar with because we got it up with the United Kingdom over a period of 47 years? That is the question on which we are awaiting a reply."

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