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UK 'should walk' from EU trade deal rather than City become 'rule taker', says senior Tory MEP

The UK should be prepared to walk from a Brexit trade deal with Brussels to protect the City rather than settle for becoming a “rule taker” of the EU, a senior Conservative MEP has said.
Concerns have been growing in the City and Westminster that the UK’s preferred outcome for financial services – a trade agreement allowing substantial market access based on “mutual recognition” of standards on both sides – will not be reached.
Michel Barnier. the EU’s chief negotiator, has repeatedly ruled it out as “cherry picking”, leaving City bosses and government officials with no choice but to privately consider alternatives.
One option – outlined in the EU’s draft Brexit negotiating guidelines in March – would be offering access under Brussels’ so-called “equivalence” regime. But this has raised fears the UK financial services sector – which accounts for 11pc of UK economic output and contributed ?72bn last year in tax – would then become a “rule taker” of Brussels, with the threat of access being revoked at 30 days notice.
UK 'should walk' from EU trade deal rather than City become 'rule taker', says senior Tory MEP

Kay Swinburne is a Conservative MEP

Credit:
Barry Batchelor
Kay Swinburne, a Conservative MEP and vice-chairman of the European Parliament’s economic committee, told The Daily Telegraph she believed this was unacceptable.
“The EU system of equivalence is fundamentally flawed. Any reliance on it would result in no regulatory stability. Either we get a financial services chapter in a free-trade agreement along the lines of mutual recognition or we walk away. Any prevarication won’t work for the UK.”
Ms Swinburne insisted the mutual recognition plan was “still on the table” in Brussels, despite Mr Barnier’s rejection of it publicly.
Her comments come after speculation last week that a rift had opened up between the Treasury and Bank of England over the right UK approach, with the Financial Times reporting that Bank officials are concerned the Treasury is willing to risk UK regulatory autonomy by striking a form of equivalence deal.
Theresa May, the Prime Minister, and Philip Hammond, the Chancellor, have previously said equivalence would be wholly inadequate for the City. However, equivalence is currently being reformed in Brussels, potentially offering them wriggle room. Mr Hammond has ruled out allowing the City to become an “automatic rule taker”.
 
A lot of countries have said 'we're here to support you' and 'our economies are intrinsically linked'. Behind the scenes they are trying to make this workRachel Kent, Hogan Lovells
Rachel Kent, a senior lawyer at Hogan Lovells, who originally drew up the mutual recognition proposal adopted by City lobby groups and the Government, said she believed it was still in play. “Nothing is lost, everything is still in play,” she said.
“I hope common sense prevails about protecting the City’s financial centre, which is a European asset.” Ms Kent said it was an open question whether going it alone would be better for the City if mutual recognition was rejected.
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