City of London Should Be Optimistic About Brexit, May Says

(Bloomberg) -- Prime Minister Theresa May said U.K. financial services should be optimistic about Britain’s trade talks with the European Union, despite EU Chief Negotiator Michel Barnier ruling out a special deal for the sector.

Speaking on the plane Thursday after meeting with Polish Prime Minister Mateusz Morawiecki in Warsaw, May said her counterpart’s openness to a deal on services was “encouraging.” She cited comments by Italian Prime Minister Paolo Gentiloni last week that there should be a “tailor-made deal” for the U.K. as evidence that other EU leaders are open to Britain carving out a bespoke trading relationship with the bloc. 

“It was good to hear that the Polish prime minister was clear about the importance of financial services, not just for London but for the whole of the European Union,” May told reporters. Morawiecki’s views “reflect the fact that other leaders as well are looking to us having a good trading relationship that isn’t based on a model that already exists.”

The remarks show how the U.K. is seeking allies among member states as it prepares to begin trade talks with the bloc in March after EU leaders agreed last week that “sufficient progress” had been made in the first phase of negotiations. It’s also a sign Britain is stepping up efforts to protect the City, with institutions including Deutsche Bank, JP Morgan and Goldman Sachs preparing to move staff from London to the continent if their current access isn’t preserved.

It’s also a rejection of the verdict of EU Chief Negotiator Michel Barnier. He used an interview published on Monday in the Guardian newspaper to rule out a special deal for the U.K. financial services industry, saying Britain had made one impossible as a result of its decision to leave the single market.

“There is not a single trade agreement that is open to financial services. It doesn’t exist,” Barnier told the Guardian.

Canada Plus Plus Plus

Britain wants to forge a new relationship with the EU after Brexit that largely replicates existing trade in goods and services. Brexit Secretary David Davis has referred to that as a “Canada Plus Plus Plus deal.” Canada’s deal with the EU covers most goods, but doesn’t extend to services: they’re the "plus plus plus" Davis was referring to.

“My view is that U.K.-EU relationship should stay close to where it is now and that the new agreement on economic and trade cooperation should be reached as quickly as possible to ensure clarity for businesses on both sides,” Morawiecki said in a press conference alongside May earlier on Thursday, warning against “dangerous” protectionism.

Britain has stepped up its defense of financial and professional services in recent days, with May and Bank of England Governor Mark Carney on Wednesday sending the message that Europe needs Britain’s banks as much as they need access to European markets. The importance of the industry to Britain is clear: TheCityUK, an industry body, estimates that it employs more than 2.2 million people and contributes nearly 11 percent of economic output.

At the end of a week which started with Barnier’s hardline stance and also saw May forced to fire Damian Green, one of her closest political allies, over pornography allegations, May said the meeting in Warsaw was a cause for optimism.

May’s Optimism

“The impression I’ve had from other European leaders is they’re looking forward to the discussions on trade, they see the importance of this,” May said. “I’m looking optimistically at the talks that we’re going to be having because the important thing is it’s not just in our interests but in the interests of the EU 27.”

The prime minister said the financial sector should “take encouragement” from the fact that her government “recognizes the importance of financial services and is clear that as we look ahead to our relationship for the future it’s important that we include services in that as well as goods,” she said.

May also spoke of her personal sadness at having to fire Green, who was found to have breached the ministerial code by lying about when he knew of allegations that pornography had been found on one of his office computers.

“I was very sad, he and I have known each other since university and he’s a good minister,” May told reporters. “But for me what was important was the cabinet secretary’s report,” she said. “It was clear there had been breaches of the ministerial code and it’s important we uphold the highest standards in public life.”

©2017 Bloomberg L.P.

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