Financial services can and should be part of a trade agreement between the UK and the EU, Philip Hammond will argue in a major Brexit speech on Wednesday.
The chancellor will use his keynote intervention in London to set out why it “makes sense” for Britain and the European Union to continue to work together on financial services, and that the sector should be part of a formal Free Trade Agreement (FTA).
He will say: “It is time to address the sceptics who say a trade deal including financial services cannot be done because it has never been done before.
“To them I say ‘every trade deal the EU has ever done has been unique’. The EU has never negotiated the same arrangement twice.
“It has bespoke relationships with Turkey, Canada, Singapore, South Korea, Switzerland.
“A trade deal between the UK and the EU must start from the reality of today; that our economies, including in financial services, are interconnected; that our regulatory frameworks are identical.”
It comes just days after Theresa May made clear she will not seek “passporting” rights for the City of London after Brexit, which allows British financial firms to sell their services right across the EU.
The prime minister said instead she would try to secure access to the EU’s market for financial services in a new free trade deal.
Hammond, who was initially thought to have been left out of a group of senior cabinet ministers asked to set out their vision for Brexit, will say British businesses and citizens depends on cross-border financial services throughout their day-to-day lives.
He is also expected to claim the UK and EU can strike more ambitious trade agreements than those secured between the EU and the US.
“Our markets are already deeply interconnected and we have demonstrated how we can work together over the past decade as we have repaired and defended the financial stability of our continent,” he will add.
“If it could be done with Canada or the USA, it could be done with the UK – the EU’s closest financial services partner by far.
“So I am clear not only that it is possible to include financial services within a trade deal, but that it is very much in our mutual interest to do so.”
Hammond’s speech follows a series of interventions made under the ‘Road to Brexit’ banner by senior ministers Boris Johnson, David Davis, Liam Fox, David Lidington and finally the PM herself last week.
Remain campaigner Andrew Adonis, speaking on behalf of the Best for Britain pro-Europe pressure group, said the only way to retain all the benefits of a free trade deal on services was to remain in the EU.
Former shadow Europe minister Pat McFadden, a supporter of the Open Britain campaign, said Hammond should “put an end to the cherry picking and wishful thinking” over Brexit.
“A year ago, the government was promising that outside the EU we could retain ‘the exact same benefits’ as we have now,” he said.
“Now the prime minister has admitted that is not the case. She has acknowledged that the Brexit promise of the same access is not going to be met.
“So instead of another bout of cherry picking and wishful thinking on the European negotiations, the chancellor should spell out exactly what the Brexit costs will be and who will pay them.
“Nowhere is the cost likely to be higher than in the UK’s world leading financial and professional services; the kind of things where we excel, but where market access is likely to be drastically limited in the hard Brexit the government is now aiming for.
“We all know the chancellor has been telling the cabinet privately there is a cost to Brexit. He might as well be consistent and give the same message to the public.”