EXCL Philip Hammond warns EU cutting off the City of London would be ‘tremendous act of self-harm'

Posted On: 
25th January 2018

Philip Hammond has fired a warning to EU leaders that they risk a "tremendous act of self-harm" if the City of London is cut off from European markets after Brexit.

Philip Hammond said trying to punish the City of London would only strengthen finance centres outside Europe

The Chancellor's comments come after French president Emmanuel Macron warned there would not be any "differenetiated access" for financial services.

Mr Macron said the only way for City firms to maintain their access to the continent would be for the UK to continue paying into the EU budget and recognise the jurisdiction of the European Court of Justice, both of which would be met with fury by Tory eurosceptics.

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Rather than replicating the existing system of passporting, the Government may seek a form of 'regulatory equivalence' whereby the UK and Brussels recognise each others' rules, with an independent body to rule on any disputes.

Speaking to The House magazine, Mr Hammond argued it would not be in the EU's own interests to try to weaken the City of London, and would only help financial centres outside Europe.

“Trying to cut London off from the EU marketplace would be a tremendous act of self-harm by the European Union," he said.

“It won’t have the effect of moving London’s business to a new global centre somewhere in Europe. It will have the effect, if anything, of strengthening New York, Singapore and other centres outside Europe.

“I think steps that we took before Christmas announcing we would continue to allow European banks to branch into the UK shows we are not afraid to engage with the challenges of Brexit.

“We are not going to play political games with the economy.”

The governor of the Bank of England, Mark Carney, has already set out his view that the European economy would suffer from any attempts to hamper the City.

“The UK financial system, like it or not is effectively the banker for Europe in the most complicated bits of finance, the wholesale markets, the equity underwriting, the derivatives, the foreign exchange trade," he told the Treasury committee last month.

“There are substantial economies of scale and scope that benefit both sides.“