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Chancellor to push post-Brexit financial services free trade deal

Chancellor to push post-Brexit financial services free trade deal

Brexit negotiations risk stalling if Britain does not present a realistic solution for the future of the Irish border after London rejected an EU fallback proposal last week, European Council President Donald Tusk said on Thursday.

The EU's chief negotiator, Michel Barnier, will then have a mandate to start negotiations on a broad-brush outline of a trade deal - a "heads of agreement" text that will be separate from the UK's EU divorce treaty. This should be "frictionless" and include access to free trade agreements already in place between third countries and the EU.

The warning is contained in draft proposals on the future shape of the EU's relationship with the United Kingdom to be put to lawmakers in the European Parliament next week.

But speaking in Dublin on Thursday Donald Tusk, the president of the European Council, directly rebuffed Mr Hammond's call, hinting that the UK's impending departure from the single market, customs union, and jurisdiction of the European Court of Justice made such an approach hard. "In fact, this will be the first FTA in history that loosens economic ties, instead of strengthening them", Tusk added.

"We were told after the Prime Minister's speech that the Chancellor would raise the issue of financial services and that Treasury owns this bit of policy, and we now assume that the Treasury is running this for the whole of the government", said the bank executive.

He added: "A pick and mix approach for a non-member state is out of the question".

Prime Minister Theresa May's spokesman, James Slack, said "we look forward to seeing the final guidelines, and hope they will provide the flexibility to allow the European Union to think creatively and imaginatively about our future economic partnership".

Image copyright Getty Images Image caption Chancellor Philip Hammond says financial services must be part of any future trade agreements.

The post-Brexit economic relationship "will only be a trade agreement", similar to those the European Union has with an array of other nations, said Tusk, who coordinates policy between the 27 European Union nations that Britain is negotiating with.

Meanwhile Labour's spokesman on the economy, John McDonnell, said financial services must be included in a future trade deal and that's a "red line".

Tusk said on a free trade agreement with Britain that "we will do our best, as we did with other partners, such as Canada recently".

Joining Norway, Iceland and Liechtenstein in the EEA is not seen as a viable option for Britain, given that the government has ruled out free movement of EU citizens, continued contributions to the EU budget and acceptance of EU rules it might not agree with.

"So far none of the trading agreements Europe has with any other country includes financial services, so I am not sure a new EU/UK trading agreement would cover that", said a source in the European Parliament.

They will discuss the ongoing Brexit negotiations, exchange views on the draft Withdrawal Agreement, and discuss additional guidelines for the future relationship between the European Union and the UK.

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