A blueprint put forward by the City for how financial services could continue to trade after Brexit has been rejected by EU officials.
According to Reuters, Brussels has dismissed the IRSG's proposal to allow firms to operate in each others’ markets without barriers because Britain has said it will leave the Single Market.
The wire quotes two sources who attended a recent meeting in which the plan, which had been thought to be gaining traction on both sides of the Channel, was tossed out.
"They have made it very clear to us that this is unacceptable to them,” said one senior British finance executive told Reuters. “This was our best and frankly only proposal. We don’t have a plan B.”
However a City source told City A.M. the report did not resonate with feedback from the continent, with relevant parties still apparently on board with the plan.
Separately, City A.M. understands that the thinking in Whitehall has also shifted since the plan was first published, with officials preferring a managed divergence route.
The source said it was recognised that the UK would have to accept regulatory alignment with some industries, such as aviation, where Open Skies would be virtually impossible to operate outside of, but that there was greater flexibility for sectors such as financial services.
A government source stressed that no single proposal would form the basis of an official position.
Chair of the IRSG, and author of the report, Mark Hoban, said: “The financial services sector has led the way in formulating its proposals for the UK’s future trading relationship with the EU and the International Regulatory Strategy Group has set out that thinking in its reports. While ambitious, this approach is backed by industry, has the interest of government and is being discussed in Member States across the EU.
“It is clear from meetings with EU institutions and member states in recent days that only now are people looking at alternative models for the UK/EU27 relationship. There is agreement that the existing third country regime does not provide a robust basis for maintaining high levels of trade.
“People are very keen to explore in detail to how our FTA model works and why it meets the UK and the EU27 red lines.”