The EU will not allow Britain to cling to advantages for its financial industry while blocking free movement of labour in the wake of Brexit, commissioner Valdis Dombrovskis warned today.
“We cannot tolerate cherry-picking,” the Brussels financial services chief told German business daily Handelsblatt.
“It’s up to the British government. If it decides not only to leave the EU but the single market as well, there will be serious effects on the City of London,” he said.
London’s financial district has benefited from Britain’s EU membership as a foothold in the single market for British and non-EU banks.
Huge volumes of euro-denominated trade pass through Britain thanks to so-called “passporting” rules, which allow the UK to host transactions in the single currency despite not itself being a part of the eurozone.
But in the wake of the nation’s June 23 vote to quit the European Union, that access may be under threat.
Without a deal to remain a part of the internal market — which Dombrovskis insisted must include the “four freedoms” of movement of capital, goods, services and labour — the City of London risks losing those rights.
Several major players in the sector, including US giant JP Morgan and Swiss UBS, have warned that thousands of jobs could leave the “Square Mile” financial district for the continent if that happens.
Eurozone banking centres including Frankfurt, Paris, Amsterdam and Dublin are all elbowing for position to benefit from any mass exodus from the City.
The commissioner offered some crumbs of comfort for the UK, saying that the question of passporting was “not immediately up for discussion” — and noted that new prime minister Theresa May has yet to trigger a two-year exit negotiation period.
In the meantime, he said, the UK remains an EU member and will have to implement any and all financial regulation decided on by Brussels.
Britain is also certain to lose the European Banking Authority regulator, Dombrovskis continued, telling Handelsblatt that “all EU authorities must of course be headquartered in the EU”.
Dombrovskis’ intervention comes on the same day as EU president Donald Tusk travelled to London for talks with May to discuss the Brexit process.
At the beginning of the meeting on Downing Street, Tusk told May: “I’m aware that it is not easy but I still hope you will be ready to start the process as soon as possible”.