The UK government will target a ‘bespoke’ deal with the EU to protect the City of London and the financial services sector after Brexit, Chancellor Philip Hammond has said.
Financial services are the UK's most important export to the EU, he said, and warned Brussels would not be allowed to use Brexit to introduce ’protectionist’ measures designed to target the City. He said no existing agreement could support the scale of financial trade between the UK and the EU.
During a speech at the UK Finance annual dinner in the City of London, Mr Hammond added that a transitional period after the UK leaves would be ‘integral’ to making a smooth Brexit.
There have been warnings that London's status as a European financial hub will be hit if the UK leaves the EU single market. Other EU governments, including Malta’s own, have already started making moves to attract London-based financial companies.
Mr Hammond sought to reassure the sector, saying the UK would seek a ‘new paradigm’ for trade in financial services with the EU. He also warned that the ‘fragmentation’ of the industry would mean business being lost to New York and Hong Kong, as well as higher borrowing costs for homeowners.
He reiterated that during this time the UK would be outside the EU and have left the single market and customs union.
But the UK and the rest of the EU would ‘retain access to each other's markets and will operate a harmonised customs arrangement ensuring a frictionless border’.