The European Commission has drawn up a list of 40 different types of financial services it could threaten to block from the EU’s market if the UK diverges from Brussels’ regulations after Brexit.
The Queen gave Royal Assent to the Brexit bill on Thursday afternoon, and apart from some administrative formalities on the other side of the English Channel, the UK will be out of the EU by January 31st, 2020.
The UK will then be in an 11-month transition period during which London and Brussels will negotiate a new trading relationship. The prime minister and recently the Chancellor of the Exchequer have been clear that after December 31st, 2020, the UK will diverge from EU regulations.
Even before negotiations have commenced, The Telegraph reports that the Commission could use the threat of an “equivalence” regime to punish the UK should it drift too far from EU standards on matters such as state aid, taxation, and the environment.
On whether Eurocrats would use the equivalence regime to force “level playing field guarantees”, one European diplomat said: “We don’t foresee it, but we could do it.”
The report comes as other reports in the media revealed the bloc wants to be able to impose a “penalty payment” on the UK for breaching terms of a future trade agreement.
Boris Backs Plans to Pursue Rapid Trade Deal with U.S., Use as Leverage over EU: Report https://t.co/NtZE9MH4U8
— Breitbart London (@BreitbartLondon) January 19, 2020
However, EU sources told The Telegraph that even if the Commission considers the measures, Europe still needs the City of London, Europe’s finance capital and a top global finance capital. Predictions of 200,000 finance workers leaving London after Brexit were not fulfilled, with a senior City worker telling media late last year that he knows of colleagues who would accept a pay cut to stay in London rather than relocate to Frankfurt.
Reports last year revealed that London remains a financial capital, with the financial services sector having grown since 2016, the year of the referendum, because there is “no realistic competitor in its time zone”, according to one industry official.
–Eurocrat Says EU-UK Free Trade Agreement Possible This Year–
Meanwhile, a Member of the European Parliament and chairman of the chamber’s Trade Committee has contradicted assertions from the President of the European Commission that a trade deal could not be completed by the end of the transition period.
German MEP Bernd Lange told BBC Radio 4’s Today programme on Thursday that “it is possible to have a trade deal done in this year”.
Commission President Ursula von der Leyen told the UK earlier this month that the country would have to make “trade-offs” to get a trade deal and that “without an extension [to the transition] you cannot agree every aspect [of the negotiation]. You will have to prioritise.”
EU Could Bar Financial Market Access Unless UK Accepts Regulations https://t.co/YaiBqF18vZ
— Breitbart London (@BreitbartLondon) January 12, 2020
Reports earlier in the week claim that Prime Minister Boris Johnson has approved plans to fast-track a U.S. trade deal as leverage when dealing with the EU, with a government source giving an example, saying: “If we can do a deal on beef with the US, that is beef we don’t need to buy from Ireland, which means we have some leverage with the EU.”
Speaking from the World Economic Forum in Davos, Switzerland, on Tuesday, President Donald Trump said: “We look forward to negotiating a tremendous new deal with the United Kingdom. They have a wonderful new Prime Minister, he wants very much to make a deal, as they say.”