Sunday 25 September 2016 11:53 pm

International trade secretary Liam Fox's steer towards hard Brexit has got the City worried - here's why

‚ÄčThe government's stance on Brexit appears to be hardening, with international trade secretary Liam Fox set to advocate that the UK pushes ahead and becomes an independent member of the World Trade Organisation (WTO).

This would set the UK on a path to leave the EU’s customs union, an area that allows the free movement of goods with no internal tariffs. His comments are expected to add to growing noises from Whitehall that suggest hard-nosed ministers are preparing for a quick and uncompromising Brexit.

Fox is set to make a major speech to the WTO tomorrow, signalling that he intends the UK to become an independent member of the organisation, which would allow him to begin trade negotiations with other countries once the UK has triggered Article 50.

The UK is currently represented by the EU in the WTO which means it is unable to negotiate trade deals with other countries.

Foreign secretary Boris Johnson said last week that Article 50 will be triggered “probably in the early part of next year”

Read more: Here's the extremely valid point Liam Fox has made amid sloppy rhetoric

Fox’s position has alarmed some in the City.

“I am getting a bit worried about what is beginning to emerge, and that is the sort of increasingly aggressive approach in the run up to the negotiations,” said Anthony Belchambers, chairman of the Honorary Advisory Council of the Financial Services Negotiation Forum, a Brexit think tank. The group’s executive committee chairman, Daniel Hodson, also added that the political consensus was “moving towards a hard Brexit”.

The government has so far refused to detail what sort of trade deal leaving the EU could lead to, and the Prime Minister has said she will not provide a “running commentary” on her preparations for negotiations. The Department for International Trade said it would not comment on Tuesday's speech.

Read more: Passporting for financial hubs works both ways, watchdog numbers show

Veteran Eurosceptic MP John Redwood told City A.M. that by voting to leave the EU, it was clear the UK wanted to leave the Single Market but to retain close access to it. “The Single Market includes freedom of movement, budget contributions and a large number of things people voted that they want to stop,” he said. “There’s no such thing as a hard or soft Brexit, the choice was clear on the ballot paper. Leave means leave.”

Read more: Thousands of City jobs at risk as US banks issue Brexit relocation warning

Commenting on negotiation with the EU, Tory MEP Daniel Hannan said that he was confident Britain would gain equivalence to passporting, which should reassure the City. He also urged the government to consider allowing special concessions for hiring in financial services as part of any Brexit deal.

“In financial services, where we are looking for top talent, the government [should be] saying… you can hire anyone you like,” he said.

Professor David Collins of The City Law School said that “retaining the same level of access for financial services without free movement is unlikely”, but added: “there is no reason to think that the UK will not get good deals…we are one of the world’s biggest economies and carry a lot of clout”.