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Brexit: Financial services pivotal to 'bespoke' deal It takes two to tango over Brexit, Hammond tells EU
(about 9 hours later)
Financial services are pivotal to the "bespoke" Brexit trade deal wanted by the UK, two senior ministers are to tell German business leaders. The EU's "relative silence" about the kind of post-Brexit relations it wants with the UK must end, Philip Hammond is to tell German business leaders.
Chancellor Philip Hammond and Brexit Secretary David Davis will call for the "most ambitious" economic partnership in the world during a trip to Berlin. There is "little, if any signal" from the EU about its priorities for talks on future co-operation due to begin in March, the chancellor is claiming.
They will stress the importance of supporting financial supervision and not allowing banking "fragmentation". "They say it takes two to tango," he will say in in Berlin. "Both sides need to be clear about what they want."
The EU has warned the UK cannot cherry-pick the kind of arrangement it wants.The EU has warned the UK cannot cherry-pick the kind of arrangement it wants.
The second phase of Brexit negotiations, covering transitional arrangements after the UK leaves in March 2019 and future economic and security co-operation, are set to officially begin in March. The second phase of Brexit negotiations, covering transitional arrangements after the UK leaves in March 2019 and future economic and security co-operation, are set to begin officially in March.
However, internal discussions within the EU about the framework of future relations have already begun following December's first-phase agreement on so-called divorce issues like money and citizen's rights. However, internal discussions within the EU about the framework of future relations have already begun following December's first-phase agreement on so-called divorce issues, like money and citizens' rights.
Mr Davis and Mr Hammond - who are on opposite sides of the Brexit argument in government but nevertheless regarded as close allies - will aim to lay down a marker for the talks ahead when they travel to the German capital on Wednesday to address the Die Welt Economic Summit. Mr Hammond and Brexit Secretary David Davis are aiming to lay down a marker for the talks ahead when they address the Die Welt Economic Summit.
'No sense' 'Repeated complaint'
In an article for the Frankfurter Allgemeine newspaper ahead of the visit, they acknowledge that their stated objective of leaving the EU's internal market and customs union means the UK will not be able to enjoy all the benefits it currently does as a member of the EU after leaving. In his speech, the chancellor will say the EU must "put behind" it any talk of punishing the UK for voting to leave the 28-member bloc and concentrate on maximising the mutual benefits of close co-operation in areas such as defence, education, science, technology and culture.
"I know the repeated complaint from Brussels has been that the UK "hasn't made up its mind what type of relationship it wants," he will say.
"But in London, many feel that we have little, if any, signal of what future relationship the EU27 would like to have with a post-Brexit Britain."
Earlier on Wednesday, in a joint-article for the Frankfurter Allgemeine newspaper, the two men argued that financial services were pivotal to the "bespoke" Brexit trade deal wanted by the UK.
They acknowledge that their stated objective of leaving the EU's internal market and customs union means the UK will not be able to enjoy all the benefits it currently does as a member of the EU after leaving.
Lack of overtures
Kamal Ahmed, BBC business editor
He is taking his message to the heart of Europe.
In a speech to business leaders in Berlin tonight, the chancellor will say it is time for the European Union to engage more positively in the Brexit negotiations. And stop talking about "punishing" the UK over Brexit.
After months of grumpy noises from Brussels over a perceived lack of clarity from the UK, Philip Hammond will say that Britain needs to hear about the ambition the EU has for a deep trading relationship with the UK.
My sources point out that with Australia, Canada and America all making positive overtures about free trade agreements with Britain, the lack of a similar offer from the EU could lead to unintended consequences.
Logically, "no deal" could be one of those. And certainly the present tone of the debate from the EU is damaging the chances of a positive outcome of the Brexit negotiations, my sources say.
Read Kamal's full blog
But they insist the EU's desire to protect the integrity of the single market for its other 27 members is "not inconsistent" with the UK's desire for the most comprehensive agreement possible.But they insist the EU's desire to protect the integrity of the single market for its other 27 members is "not inconsistent" with the UK's desire for the most comprehensive agreement possible.
"It makes no sense to either Germany or Britain to put in place unnecessary barriers to trade in goods and services that would only damage businesses and economic growth on both sides of the Channel," they write."It makes no sense to either Germany or Britain to put in place unnecessary barriers to trade in goods and services that would only damage businesses and economic growth on both sides of the Channel," they write.
"So as Brexit talks now turn to trade, the UK will look to negotiate a new economic partnership with the EU - the most ambitious in the world - that recognises the extraordinary levels of interconnectedness and cooperation that already exist between us. "So as Brexit talks now turn to trade, the UK will look to negotiate a new economic partnership with the EU - the most ambitious in the world - that recognises the extraordinary levels of interconnectedness and co-operation that already exist between us.
"When we leave the EU, we will leave the Customs Union and Single Market, but in agreeing a new model of cooperation, we should not restrict ourselves to models and deals that already exist." "We should use the imagination and ingenuity that our two countries and the EU have shown in the past, to craft a bespoke solution."
"Instead we should use the imagination and ingenuity that our two countries and the EU have shown in the past, to craft a bespoke solution that builds on our deeply integrated, unique starting point to maximise economic cooperation, while minimising additional friction."
'Preaching to the converted'
Jenny Hill, BBC Berlin correspondent
David Davis and Philip Hammond want to "highlight the important relationship" between Germany and Britain.
Today, they're preaching to the converted. Germany's business community - in particular the mighty car industry - are extremely jittery about the implications of Brexit.
A "no deal" scenario is the stuff of nightmares for the German industrialist. Nevertheless, the business lobby stands - officially at least - firmly behind Angela Merkel.
Her position, Germany's position, hasn't changed and it's unlikely to now. Single market access is conditional upon freedom of movement. There'll be no cherry picking for Britain.
Don't expect to hear much from Mrs Merkel on the subject - she's preoccupied by the tricky business of trying to form a stable government.
But whatever shape that government takes, don't expect any shift in tone from Berlin.
Germany considers its relationship with Britain is important. But here the integrity of the EU matters more.
The UK's preferred model for a post-Brexit deal is what Mr Davis has described as Canada plus, plus, plus - a reference to Canada's low-tariff free trade deal with the EU but with services included as well as goods.The UK's preferred model for a post-Brexit deal is what Mr Davis has described as Canada plus, plus, plus - a reference to Canada's low-tariff free trade deal with the EU but with services included as well as goods.
While not mentioning Canada by name, the two men make clear in the article that unrestricted trade in services - which makes up about 80% of the UK economy - will be pivotal to any successful deal. The two men make clear in the article that unrestricted trade in services - which makes up about 80% of the UK economy - will be pivotal to any successful deal, as will financial and regulatory co-operation within Europe.
Citing the spectre of financial contagion which hung over Europe after the 2008 banking crisis, they argue that continued financial and regulatory co-operation within Europe after Brexit is essential if the continent is to "lead the world" in terms of enhancing global financial supervision. The EU's chief negotiator, Michel Barnier, has warned the UK it cannot hope to get a special deal for the City of London and that its options have narrowed as a result of it turning its back on the single market.
"That work should not end because the UK is leaving the EU," they add. UK-based banks and financial firms are worried they will lose the passporting rights that allow them to trade freely in the EU after Brexit - an outcome that is likely to see firms moving jobs to the continent.
"On the contrary, we must re-double our collective effort to ensure that we do not put that hard-earned financial stability at risk - by getting a deal that support collaboration within the European banking sector rather than forcing it to fragment."
The EU's chief negotiator Michel Barnier has warned the UK it cannot hope to get a special deal for the City of London and that its options have narrowed as a result of it turning its back on the single market.
UK-based banks and financial firms are worried they will lose the passporting rights that allow them to trade freely in the EU after Brexit - an outcome which is likely to see firms moving jobs to the continent.