Banks based in Britain will lose access to EU markets after Brexit unless the country remains in the broader European trading group that includes nations such as Norway, the head of Germany’s Bundesbank warned on Monday.
Jens Weidmann, signaling a tough line from Germany on the Brexit divorce talks to come, said Britain would need to be in the European Economic Area (EEA) to keep the so-called passporting rights that allow its banks sell their services across the European Union.
The EEA is the trading club comprising the 28 EU states plus Norway, Iceland, and Liechtenstein, three non-EU nations who can access the bloc’s single market in return for applying its rules and accepting the free movement of EU citizens.
“Passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area,” German central bank chief Weidmann, who is also on the governing council of the European Central Bank, said in Britain’s Guardian newspaper.
British banks will lose “passporting rights” to do business in the European Union after Brexit, the EU’s chief Brexit negotiator has said.
Speaking in Brussels on Monday Michel Barnier said that “Brexit means Brexit, everywhere” and that there could be no opt-ins to parts of the single market for certain industries.
“On financial services, UK voices suggest that Brexit does not mean Brexit.
Brexit means Brexit, everywhere,” Mr Barnier said in a major speech to a think-tank.
“The legal consequence of Brexit is that the UK financial service providers lose their EU passport.
This passport allows them to offer their services to a market of 500 million consumers and 22 million businesses.”
The pronouncement is bad news for the City, where over 5,400 British firms rely on passporting rights to bring in £9 billion in revenue every year to Britain.
The BBA has said the loss of passporting would be “disruptive, costly and time-consuming”.
It also comes the same day as the EU announces where it will relocating the European Banking Authority, an EU agency currently based in London, after Brexit.
The chief negotiator said the EU might judge some UK rules as “equivalent” to EU passporting rights but ruled out the City of London having access to EU financial markets under the same passporting deal as now.
Mr Barnier told the audience at the Centre for European Reform:
“Those who claim that the UK should pick parts of the single market must stop this contradiction. The single market is a package, with four indivisible freedoms, common rules, institutions, and enforcement structures.
“The UK knows these rules very well, like the back of its hand.
It has contributed to defining them over the last 44 years with a certain degree of influence.
We took note of the UK decisions to end free movement of people and this means clearly that the UK will lose the benefits of the single market.
“This is a legal reality; the EU does not want to punish, it simply draws the logical consequence of the UK decision to take back control.”
As well as ruling out a carve-out for the financial sector, Mr Barnier appeared to suggest there could be no special deal for the UK’s car manufacturers to stay in the single market, as proposed by industry bodies.
In the same speech the senior EU official also expressed disappointment at what he suggested as a fixation in some British circles on “no deal” being a viable option for the UK.
“We have a shared history and this started long before the last 44 years.
This is why the no deal is not our scenario, even though we will be ready for it,” he said.
“I regret that this ‘no deal’ option comes up so often in the UK public debate.
Only those who want to ignore the current benefits of EU membership can say that no deal would be a positive result.”