Britain says financial services must be in Brexit deal

British finance minister Philip Hammond said on Wednesday that financial services should be at the heart of a new trade deal and the European Union should drop its tough stance on limiting the sector’s market access after Brexit.

In a rebuff to Britain, the EU’s draft guidelines for a trade deal released on Wednesday will only offer financial services firms in London a limited ability to sell many of their services to European companies.

But Hammond said the EU had sought to include financial services in other trade agreements in the past, and it made no sense to exclude them from the Brexit deal that London and Brussels are due to hammer out in the coming months.

“It is hard to see how any deal that did not include services could look like a fair and balanced settlement,” Hammond said in a speech at HSBC’s headquarters in Canary Wharf, home to some of the world’s largest financial firms.

“So I am clear not only that it is possible to include financial services within a trade deal, but that it is very much in our mutual interest to do so.”

London vies with New York as the world’s financial capital, dominates global foreign exchange, hosts the largest commercial insurance market and more banks than any other centre, something Hammond said helped EU companies and consumers.

The future of London as Europe’s financial centre is one of the biggest issues in Brexit talks because it is Britain‘s largest export sector and biggest source of tax. Rival cities within the bloc are battling to draw highly-paid banking jobs and the revenues they bring.

Hammond proposed that Britain and the EU would allow cross-border trade in financial services on the condition that each side preserve regulatory standards in line with the best international standards. This model would be maintained by close co-operation between regulators.

The proposals are the most detailed yet from the government on how a long-term agreement on financial services with the EU might work after Brexit, more than 20 months after Britain voted to leave the EU.

“The United Kingdom cannot automatically be a rule-taker,” Hammond said. “We cannot sign up to automatically accept as-yet unknown future rule changes. We must have the ability if necessary, to deliver an equivalent outcome by different means.”

The EU’s draft guidelines are seen by Britain as a starting point from a skilled negotiator in trade agreements, he said.

“It does not surprise me remotely that what they set out this morning is a very tough position,” Hammond said.