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Ministers are looking to negotiate a transitional trade deal with the EU — including possibly paying a single market access fee to Brussels — to avoid a “cliff-edge” for exporters and the City of London after Brexit in 2019.
A smooth transition over several years after Brexit is a key demand for the City and for countries such as Japan
, which fear there could be disruption in trade while Britain and the EU hammer out a new free-trade agreement.
One senior banker said people in the sector were “shooting themselves in the head” on Tuesday after Bloomberg cited a senior figure in Theresa May’s administration saying her team had privately dismissed an interim deal with the EU.
But the claim was strongly denied by Mrs May’s allies. Several ministers told the Financial Times that a transitional trade deal was likely to be a key part of Brexit negotiations that begin next year.
“We are working to deliver the best possible exit from the European Union and it is completely wrong to suggest we have ruled in or out transitional arrangements,” a government spokesman said.
“Just this week we announced that European laws and regulations would be transferred to British law upon our exit from the European Union, in order to provide certainty for businesses that operate in the UK.”
One option being considered is that Britain might continue to pay into EU coffers as an entry fee to the single market during the interim period, pending agreement and ratification of a new trade deal.
Although such a move would be contentious with Tory Eurosceptics, ministers acknowledge there would be a gap of several years between Brexit — scheduled for 2019 — and the entry into force of new trade arrangements.
A similar trade deal between the EU and Canada has been under preparation for seven years; the ratification by all 27 remaining member states of a potentially more complicated deal with Britain could take a number of years.
There is a “la la la la la la” moment going on. Financial services companies are not the top priority at the moment
– Iain Anderson, head of public affairs group Cicero
The City of London nevertheless is increasingly jittery about Brexit and a sense that Mrs May is prioritising controls on immigration over seeking to ensure privileged access to the single market for the financial services sector.
Mrs May’s allies insist she does care about financial services but the banks needed to realise she also had to take other interests into account and that they should engage with government like any other sector.
Some senior officials say bankers can appear “too needy” and that they have “cried wolf” before — notably when warning that the City would be badly hit if Britain didn’t join the euro. They also acknowledge that this time the banks may have a point.
Delegates at the Conservative party conference in Birmingham have noted an absence of ministers from fringe sessions about the financial services industry compared with usual.
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Iain Anderson, head of public affairs group Cicero — which includes some of the biggest banks among its clients — said some ministers were not in a particularly receptive mood.
“There is a ‘la la la la la la’ moment going on. Financial services companies are not the top priority at the moment,” he said. “This is all about the message that they want to govern differently. Finance for its part needs to learn how to talk differently to this government.”
The City of London has lobbied hard for adequate transitional arrangements that will minimise the impact of even a “hard” Brexit — which the latest City report forecasts will cost the UK as many as 75,000 jobs and £10bn of tax revenues.
The report from Oliver Wyman, the consultants, says transitional arrangements and grandfathering rights are “critical”.
Wall Street bankers last month warned Theresa May that they needed a “long runway”, and a transition period lasting several years, in what was described by British officials as “a frank exchange of views”.