Losing access to the single market and passporting would be "calamitous" for the financial services sector, say MPs

Natasha Clark
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MPs discussed business fears over passporting and equivalence (Source: Getty)

Losing access to the single market and passporting would be "calamitous" for the financial services sector, MPs have said.

In a backbench debate on the impact of Brexit on financial services, Conservative MP Stephen Hammond listed the risks of losing vital access in a deal with the EU.

He called on the government to look at "cross industry work visas" to establish access to those who need it. The government has said it seeks to gain controls on freedom of movement, which has ruffled feathers across businesses.

MPs repeated pleas for the government to commit to transitional arrangements for the City and other financial services businesses in the event that the UK did not manage to negotiate a deal in the allotted two-year time frame. If this could not be reached, with many MPs are afraid would be the case, the UK would fall back on WTO terms of trade.

The chancellor, Philip Hammond, has been keen to stress in recent weeks that he will prioritise the City in future, after some businesses raised their fears with City A.M.

"Businesses cannot wait to get that certainty," said Liz Kendall, the Labour MP who secured the backbench debate. "This will have a huge knock-on effect on the rest of the economy."

Kendall was keen to stress the "deep concerns" of a number of businesses, who feared losing their membership of the single market, and access to passporting.

She also went on to say that there were many problems with relying on what is known as equivalence, which some have suggested would be sufficient to guarantee continued trading after the UK leaves the EU.

Read more: UK financial services sector goes from strength to strength

She said that the EU was under "no obligation to [give equivalence], it can take years, can be time limited.. and withdrawn at any time."

The UK will move from being a rule maker to a rule taker. This is not what our financial services want.

Economic secretary to the Treasury, Simon Kirby, told her that "passporting, or rather the access to EU markets that comes with it" was one of the "key areas under negotiation". He added:

The UK is looking for a sensible discussion on how our two markets can continue to serve one another and what is needed to support that... We are determined to secure the best deal possible.

MPs across the chamber voiced their worries about businesses moving overseas where there could be better access to the EU after Brexit, and noted that countries such as France and Spain had already been trying to attract them.

"Many companies have been planning for months to try and mitigate the risks of Brexit. There is a mandate to leave the EU but no mandate for the conditions," Kendall added.

Read more: Government vows to appeal to High Court after Article 50 ruling

MPs also noted what they said was "negative" rhetoric at the Conservative party conference around freedom of movement.

Home secretary Amber Rudd had previously said that businesses could be forced to publish lists of foreign workers, but the idea was later scrapped.

"It was a huge strategic mistake," Kendall said.

However, Conservative Brexiteer Sir Bill Cash said the media has "overstated" the issues for financial services.

"You only have to look at Singapore and Hong Kong... one does not have to be in the UK to have a successful financial services sector and compete in the global market place," he said.

"Only 7 per cent of assets managed in the UK would be threatened by the loss of the passport," he added, recommending equivalence or a bespoke agreement.

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