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UK given new warning by EU about Brexit deal for financial sector

Staff Writer |
Theresa May has received a fresh warning that she could struggle to get a Brexit deal which includes the UK's lucrative financial sector.

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In her Mansion House speech on Friday, the UK prime minister set out her plans for Britain and the EU to access each other's financial markets based on a commitment to maintaining the same "regulatory outcomes".

However Stefaan De Rynck, a senior adviser to the EU's chief negotiator Michel Barnier, said that since the global crash of 2008, the EU had increasingly moved away from a system of "mutual recognition" by member states of each others' rules to more centralised regulation.

Speaking at the London School of Economics on Monday, he said if there was a "market failure" it meant the EU authorities could step in to intervene - which would no longer apply to the UK if it was outside the EU.

"We have moved away from mutual recognition of national standards to a centralised approach with a single EU rule book with common enforcement structures," De Rynck said.

"If you are in a very integrated market but you don't have the joint enforcement structures then you can see the potential for all kinds of difficulties."

His comments came as Philip Hammond told MPs that a deal which did not include financial services would lack credibility.

The Chancellor, who his due to set out the government's thinking in more detail in a keynote speech on Wednesday, the EU would find it impossible to replicate the financial "eco-system" of the City of London it was excluded.

"I don't think it is credible. I don't think it reflects the real world in which we live," he told the Commons European Scrutiny Committee.

"(Given) the scale of the UK-based financial services sector and the deep involvement it has in the operation of the real economy in the EU, I don't think it is in anybody's interest to sever that link in key areas."

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