Posted on 14/09/2017 by

The UK government will aim for a "bespoke" deal with the EU to protect the City of London after Brexit, Chancellor Philip Hammond has said.

Financial services are the UK's most important export to the EU, he said.

Mr Hammond warned Brussels would not be allowed to use Brexit to introduce "protectionist" measures designed to target the City.

And he said a transitional period after the UK leaves would be "integral" to making a smooth Brexit.

The UK is due to leave the EU in March 2019.

• Juncker: UK will 'soon regret' leaving EU
• City envoy says France wants 'disruptive' Brexit
• City of London 'to press EU for post-Brexit deal'

There have been warnings that London's status as a European financial hub will be hit if the UK leaves the EU single market, and other EU governments have already begun wooing London-based financial companies.

Mr Hammond sought to reassure the sector in a speech at the UK Finance annual dinner in the City of London, saying the UK would seek a "new paradigm" for trade in financial services with the EU.

Financial services are "our most important EU export sector" and must be protected, he said.

The chancellor said he accepted the EU had legitimate concerns about the supervision of financial markets in London which provide services across the continent, but said the UK would not accept "protectionist agendas, disguised as arguments about financial stability".

Calling for a bespoke deal for the sector, he said no existing agreement could support the scale of financial trade between the UK and the EU.

'Good start'

And he warned that the "fragmentation" of the industry would mean business being lost to New York and Hong Kong, as well as higher borrowing costs for homeowners.

Brexit negotiations cannot move forward to trade matters until the EU is happy progress has been made on the initial subjects, including the UK's "divorce" settlement and citizens' rights.

The chancellor said Brexit talks had "got off to a good start, despite the media reporting", and set out his goal for a time-limited transitional period - which he said earlier this week would "look a lot like the status quo".

He reiterated that during this time the UK would be outside the EU and have left the single market and customs union.

But the UK and the rest of the EU would "retain access to each other's markets and will operate a harmonised customs arrangement ensuring a frictionless border", he added.

Downing Street has confirmed that Prime Minister Theresa May will make a speech in Florence on 22 September to "underline the government's wish for a deep and special partnership" with the EU.

Source: