London's banking chiefs will travel to Brussels this week to shore up the UK capital's financial services sector post-Brexit. Several banks are planning to move staff to Frankfurt and Dublin to satisfy EU finance rules.
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A delegation led by Britain's former minister for the City of London Mark Hoban will meet European Union diplomats this week to discuss the financial district's future after the UK exits the EU, the Financial Times reported on Monday.
The paper said Hoban would deliver a secret blueprint for a post-Brexit free-trade deal on financial services, amid concerns that one of the major drivers of the UK economy may be severely weakened by the country's impending divorce.
The Associated Press later reported that the talks would take place on Wednesday.
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London is currently ranked the number one financial center in the world by the Global Financial Centers Index, beating New York, Hong Kong, Singapore and Tokyo.
London's status vulnerable
But fears that the British government is preparing for a so-called "hard Brexit," where Britain leaves the EU's single market and customs union, could see London lose its attractiveness as an investment hub. Already several large banks are planning to move staff to other EU financial centers including Frankfurt and Paris.
Hoban, who now works as a consultant, has spent months working on the blueprint, the FT said, amid concerns that London's financial services industry may lose its edge over other financial centers. The loss of so-called passporting rights, which allows London-based institutions to offer services to clients in the 27 remaining EU states (EU27) under looser British regulations, has helped the UK capital maintain its dominance.
As Britain has just two years to negotiate its divorce and future relationship with the rest of Europe, there are worries that the deadline could be reached before the full terms of a deal can be agreed to retain easy access to EU markets.
Mutual access
Hoban's plan would give financial groups from the UK and EU27 "mutual access" to operate in each other's markets without barriers, the paper reported.
The FT said the talks between the City of London delegation and EU envoys would take place independently of the British government's negotiations. The paper cited three officials close to the project as saying that some government officials had given unofficial support for the arrangement.
British Prime Minister Theresa May has also stressed that the UK negotiating delegation should not be undermined in their attempts to get the best possible future deal.
Government too narrow
The FT said the City's own blueprint revealed how worried finance chiefs are that the British government is too focused on narrow issues related to Brexit.
Highlighting the vulnerable position London finds itself in post-Brexit, the paper reported that the UK financial center provides three-quarters of EU hedging activities and foreign exchange, and half of the bloc's lending and securities transactions. Other EU financial hubs, including Frankfurt, are eager to swipe a major share of these services from London.
Brexit negotiations: What are the key issues?
Brexit talks began in June and both sides have been frustrated at the lack of progress. DW has taken a look at key issues being debated in Brussels as the clock ticks toward Britain's scheduled departure in March 2019.
Image: picture-alliance/dpa/o. Hoslet
Two phases
EU leaders agreed to negotiating guidelines during a summit in April 2017 that divided the divorce talks into two phases. Phase I, in which both sides aimed to settle the basic terms of Britain's departure, started in July and ended with an agreement on "sufficient progress" in December. Officials are now holding Phase II negotiations on the post-Brexit relationship between Britain and the EU.
Image: Reuters/File Photo/Y. Herman
The "Brexit Bill"
London agreed to a formula for calculating what it owes in its "divorce bill" to the EU in early December after months of haggling by British officials. The current EU budget expires in 2022 and EU officials have said the divorce bill will cover financial obligations Britain had committed to before triggering article 50. The final bill will reportedly total around £50 billion (€67 billion).
Image: picture-alliance/empics/D. Martinez
Citizens' rights
Both sides agreed in early December that the 3 million EU citizens currently in Britain and the 1.1 million British citizens in the EU keep their residency rights after Brexit. British courts will have immediate jurisdiction over EU citizens living in Britain. But the EU's highest court, the ECJ, can hear cases until 2027 if British judges refer unclear cases to them.
Image: picture-alliance/dpa/B. Smith
The Irish border
Britain and the EU also agreed in December that no border checks between the Republic of Ireland and Northern Ireland would return post-Brexit. How feasible the commitment will be is unclear, as Britain's commitment to leaving the EU Single Market and Customs Union makes it difficult to avoid customs checks at the Irish border.
Image: Reuters/C. Kilcoyne
Transition period
Theresa May envisages a two-year transition period after March 2019. Both sides still have to hash out the details of the transition period in Phase II, including the exact end-date, whether new EU laws passed during the period will apply to Britain, and whether Britain can negotiate its own free trade deals. British officials hope to agree on the terms of the transition by March 2018.
Image: Imago
Trade
May has repeatedly said Britain will leave the European Single Market and the EU Customs Union. Leaving both could disrupt British-EU trade, but allow Britain to negotiate its own free trade deals and restrict EU migration — key demands by pro-Brexit politicians. London has said it wants to negotiate a new EU-UK trade deal during Phase II to minimize trade disruption before March 2019.
Image: Picture alliance/empics/A. Matthews
Immigration
Britain has also vowed to restrict EU migration into Britain after Brexit. However, some British lawmakers are wary that a sharp drop in immigration could lead to shortfalls in key sectors, including health, social care and construction. The EU has warned that Single Market access is out of the question if London decides to restrict the ability of its citizens to live and work in Britain.
Image: picture alliance/PA Wire /S. Parsons
Security
Recent terror attacks across Europe including a string in Britain underline both sides' support for continued security cooperation after March 2019. But access to EU institutions such as Europol and programs such as the European Arrest Warrant require compliance with EU laws. Whether Britain will still be compliant after it leaves is unclear.
