And we're off: Theresa May puts trade and the City centre stage as Brussels prepares to play hardball in Brexit negotiations

William Turvill
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The UK triggered Article 50 on 29 March following the EU referendum on 23 June 2016 (Source: Getty)

European Council president Donald Tusk yesterday received the UK’s Article 50 letter from ambassador Sir Tim Barrow. “There is no reason to pretend that this is a happy day,” Tusk said.

The letter, signed by Theresa May, struck a more upbeat tone, and placed the City of London at the heart of the Prime Minister’s negotiation strategy.

May called for a “bold and ambitious” free trade agreement between the UK and European Union.

“This should be of greater scope and ambition than any such agreement before it so that it covers sectors crucial to our linked economies such as financial services and network industries,” she said. The letter also called for trade talks to be run in parallel with exit negotiations.

Read more: Article 50: what the City's leading groups want from the Brexit talks

City groups welcomed the prospect of parallel trade negotiations and spoke out in favour of a “bespoke” deal in order to preserve the City.

“For the UK-based financial and related professional services industry, the right Brexit deal will be bespoke, underpinned by mutual market access and based on mutual recognition and regulatory cooperation,” said Miles Celic, chief executive of TheCityUK.

“As an industry that employs over 2.2m people right across Britain and serves customers here, in the EU and around the world, a smooth, orderly exit and certainty are vital.”

Investment Association chief executive Chris Cummings said:

We need a bespoke agreement that hinges on mutual market access, access to global talent, legal certainty and preserving the entirety of the UK’s financial services ‘ecosystem’.

However, senior European parliamentarians warned negotiators against pursuing a special deal for the City of London, and said talks on the UK’s future relationship with the EU must not begin until a withdrawal agreement has been reached.

A leaked draft motion from the European Parliament, signed by its top Brexit representative Guy Verhofstadt, reminded EU states that they are not allowed to pursue bilateral arrangements with the UK’s financial services sector, and also said it would not support industry-specific deals.

Think tank Open Europe played down the significance of the European Parliament document, highlighting the minimal role the body and Verhofstadt will play in negotiations.

Read more: The financial winners and losers from Brexit

“Ultimately the main drivers will be national governments and the member states which will give the mandate to the negotiators,” said Stephen Booth, Open Europe director of policy.

Politicians and commentators from across the continent yesterday spoke out for fair negotiations with the UK. “The approach must not be to punish London,” Italian foreign minister Angelino Alfano was quoted saying.

Swedish PM Stefan Lofven said: “We want trade relations to be as favourable as possible.”

Elsewhere, Clemens Fuest, president of the German Ifo Institute, said: “Germany is very interested in having a comprehensive free-trade agreement. Otherwise, Germany could become a major Brexit loser.”

However, doubts emerged yesterday over German Chancellor Angela Merkel’s willingness to enter trade negotiations with the UK during the exit negotiations. Previous comments had suggested she was open to the prospect of parallel talks.

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