Government ministers will spend much of August using one-to-one meetings with EU counterparts to press the case for a financial services deal, fearing the Commission has been deliberately misconstruing the UK’s official position.
Senior figures including chancellor Philip Hammond and the new foreign secretary Jeremy Hunt have been among those clarifying the stance adopted in the Brexit white paper that was published last month. The UK side believes EU chief negotiator Michel Barnier wilfully misrepresented it following publication, City A.M. understands.
Ahead of the Chequers summit ministers were encouraged to meet their counterparts throughout the summer, but were reportedly warned by Theresa May’s Europe adviser Olly Robbins that it would not be a “silver bullet”.
However they upped the ante after the white paper was published. City A.M. understands that Barnier told EU ministers that the UK's proposed model cannot be adopted, a move which Downing Street interprets as a refusal to budge from his insistence that any deal be based on an existing model. Barnier's intransigence has led directly to the renewed push by UK ministers to appeal directly to EU ministers – over the head of the EU chief negotiator.
The government had used the document to drop calls for mutual recognition of financial services regulations, seen as too challenging for negotiators. Instead it called for an "expanded equivalence" model after leaving the EU, describing it as a “reciprocal recognition of equivalence”.
This was envisaged as a “new economic and regulatory arrangement based on the principle of autonomy for each party over decisions regarding access to its market”.
While City figures have concerns over how sufficient equivalence would be, government sources have insisted the model would be a vast improvement on existing frameworks, but one which safeguards both sides’ ability to unilaterally withdraw access.
An HM Treasury spokesperson said: “Last week we held positive discussions with the European Commission on our proposal for a pragmatic new arrangement for financial services after we leave the EU.
“We found common ground in recognising both the EU’s and UK’s desire to have control over their own decision making, and the need for bilateral dialogue and co-operation to reflect the deeply integrated nature of UK and EU financial markets.
“More work needs to be done, and we look forward to further discussions.”
The Commission did not respond to requests for a comment.
Yesterday Hunt urged France and Germany to back the UK, telling the Evening Standard these member states "have to send a strong signal to the Commission that we need to negotiate a pragmatic and sensible outcome that protects jobs on both sides of the Channel because for every job lost in the UK, there will be jobs lost in Europe as well if Brexit goes wrong.”