Labour Eyes Brexit Immigration Compromise to Keep Banks in U.K.

(Bloomberg) -- Britain’s opposition Labour Party would be willing to set aside voter demands for an immigration clampdown in order to secure a Brexit deal that keeps financial services companies in London.

Shadow Chancellor John McDonnell said a Labour government would show “flexibility” on the issue of freedom of movement and would see that as the price of maintaining good access to the European Union’s single market. The EU says there can be no single market access without free movement, and the U.K. government has said taking back control of immigration is a red line in the negotiations.

McDonnell -- a lifelong anti-capitalist -- was speaking as part of his effort to reassure businesses, especially in the finance sector, about the prospect of a government led by his longtime ally Jeremy Corbyn. Labour is better positioned than Theresa May’s Conservative government to secure a “compromise” Brexit deal that would “secure” that access for financial services, he said in an interview at Bloomberg’s London office on Thursday.

“We’re walking a tightrope all the time,” he said. “We campaigned for ‘Remain’ -- we lost. A lot of our Members of Parliament sit on constituencies that voted to leave. My constituency voted to leave. Our whole process is to try and get a rational, reasonable discussion of the pros and cons of where we go from here.”

‘Think Again’

McDonnell pitched Labour as the party to rescue banks from the potential damage of trade barriers. “If they’re thinking of leaving London because of Brexit, think again,” he said. “We think when we get into government -- and that could be any day -- we think we can get a deal which will secure their future, both in terms of access for financial services to the rest of Europe, but also in the strength of our economy for the future.”

The party’s discussions with EU negotiator Michel Barnier had been “constructive,” he said. “He knows where we’re coming from, we know where they’re coming from.”

Labour is committed to try to seek a customs union with the EU, which Brussels is also keen on, McDonnell said. “When we’ve raised that we want as close proximity as we possibly can, it’s been well received, and we think we could get a deal,” he said.

EU officials have complained that the British government hasn’t given enough detail on what it wants from its future relationship with the bloc, and described what they’ve heard so far as unacceptable cherry-picking of some parts of EU membership.

McDonnell acknowledged that many Labour voters didn’t like EU rules that have allowed large levels of migration from Eastern Europe. “We think we can cut through some of those concerns that people have,” McDonnell said.

“I think there’ll be flexibility around freedom of movement. We accept that. From both sides,” he said, declining to give details on what Labour was prepared to offer. “Other countries have elements of flexibility around freedom of movement that I don’t think we’ve even explored.”

That could be a reference to Norway, which is part of the European Economic Area. All EU citizens can travel there to seek work, but they must find a job within three months. Labour’s Brexit spokesman, Keir Starmer, said separately on Thursday that there are many EU countries that want to have a debate about free movement because the current system isn’t working for them, either.

©2018 Bloomberg L.P.