Friday 21 October 2016

UK banks won't have access to the single market, EU Capital Markets chief warns

Sarah Collins in Brussels

Published 22/09/2016 | 06:00

UK banks won't get unfettered access to the EU single market if Britain chooses a "hard" Brexit, the bloc's financial services chief has said.

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European Commissioner Valdis Dombrovskis said "passporting" rights for banks - the ability to operate freely across borders - will be guaranteed only if the UK negotiates access to the single market after leaving.

That means continuing to allow EU migration to the UK and paying into the bloc's budget, an option that Brexit minister David Davis has said is not on the cards.

"If the UK remains within the internal market, it can keep passporting," said Mr Dombrovskis, the European Commission's vice-president in charge of the euro and financial services.

Paying to stay in the single market would likely cost Britain even more than EU membership. Norway paid around €870m into EU funds in 2015, or €167 a head. It's more than Britain's current €160 per head.

Brexit rhetoric has intensified in the last week, with Eastern European countries threatening to veto any deal that restricts EU migration, and the UK mooting the possibility of leaving without a new trade deal, in a so-called "hard" Brexit.

"Being part of the EU internal market, of course, economically, will mean an entirely different thing from going for a so-called 'hard' Brexit, meaning leaving also the internal market," Mr Dombrovskis said in an interview this week.

"As regards membership of the internal market, access to the internal market, it comes with conditions: respect of the four freedoms, financial contributions to the EU, and respect of EU rules and regulations," he added.

"This is a strategic choice, then, for the UK to make - whether it's willing to stick with those conditions in order to have access to the internal market," he said.

Since taking over the EU financial services role in July Mr Dombrovskis has been spearheading creation of a "capital markets union" across the EU to rival the City of London.

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