UK discusses paying billions to keep City’s single-market access

British finance sector an area likely to benefit from potential regulatory regime deal

Britain’s prime minister Theresa May: has not ruled out making future payments to the EU to secure privileged access to the single market in the wake of Brexit. Photograph: Ben Birchall/Reuters

Britain’s prime minister Theresa May: has not ruled out making future payments to the EU to secure privileged access to the single market in the wake of Brexit. Photograph: Ben Birchall/Reuters

 

Britain would continue to pay billions of pounds into the EU budget after Brexit to maintain single-market access for the City of London and other sectors under plans being discussed by Theresa May’s cabinet.

The prime minister’s demand that Britain controls its borders and throws off the jurisdiction of EU judges has led many in London and Brussels to conclude that UK-based banks and insurers would inevitably lose the “passporting” rights that allow them to trade freely in Europe.

But in a move likely to upset Eurosceptics in her governing Conservative party, Ms May has not ruled out making future payments to the EU to secure privileged access to the single market. Finance is among the sectors most likely to benefit in any deal that recognised the “equivalence” of regulatory regimes.

She assured Japanese carmaker Nissan on Friday that trading conditions for its car plant in northeast England would not change after Brexit, in the first suggestion the government could pick favoured sectors to shield from the impact of leaving the EU.

EU budget

Several ministers have said the cabinet is considering how Britain could carry on paying billions of pounds into the EU budget. “We would have to be careful how we explained it,” said one. “But Theresa has been very careful not to rule it out.” Another senior Conservative said: “With Theresa, you have to listen carefully to the silences.”

The UK statistics office said the average annual net British contribution to the EU between 2010 and 2014 was £7.1 billion (€7.9 billion), once the UK rebate and flow of money back from Brussels to projects in the UK was taken into account. On top of any future EU payments after Brexit, the UK will face a divorce bill from the bloc for up to €20 billion, according to FT analysis.

Bankers are pushing London to find a way for the sector to keep as many passporting rights as possible. They argue that relying on schemes that have regulatory equivalence with the EU would not prevent them moving jobs.

Donald Tusk, European Council president, said last week that “the essence of Brexit” appeared to include no further budget contributions, adding that the UK was heading for a “radical” break. – Copyright The Financial Times Limited 2016