In a letter published today, UK banks told Theresa May that a Canada-style Brexit is not ambitious enough and that alignment with EU laws on finance is crucial.
The letter, which was from the UK’s top financial lobby group, told the Prime Minister that whilst the Canadian deal was an “interesting template”, the City would need to be at the centre of trade talks.
The letter said: “Ceta [the Comprehensive and Economic Trade Agreement between the EU and Canada] is an interesting template, but given the UK and the EU 27 start from a position of regulatory convergence that the UK and Canada didn’t have, we should seek to be far more ambitious,”
The banks are hoping to avoid a hard Brexit, opting for a smoother transition.
The UK’s financial centre has expressed concern over Brexit since the referendum in June 2016. Many of the major banks have made plans to move operations to other European cities such as Frankfurt and Paris.
The letter added that a smoother Brexit was unnecessary to avoid “an unnecessary loss” of GDP.
“Pragmatic decisions to align the two regimes from a regulatory perspective … should be seen not as concessions, but as mechanisms to maximise benefits and choice within a deep regional capital market for the benefit of citizens and our economies,” it said.
“A high degree of mutual cross-border market access is fundamental to the continued success of our financial services sector – and to the success of the economies and citizens which our sector serves in the UK and the EU 27,”
A Canada-style Brexit would affect UK finance in several ways. UK operations in the EU would have to be governed on the basis of the World Trade Organization’s General Agreement on Trade in Services. This would mean that UK based banks would lose their “passport” rights that allow firms to easily provide services across borders.