Financial services are pivotal to the “bespoke” Brexit trade deal wanted by the UK, two senior ministers are 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.They will stress the importance of supporting financial supervision and not allowing banking “fragmentation”.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.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.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.’No sense’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.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.”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.”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.””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 correspondentDavid 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.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.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.
“That work should not end because the UK is leaving the EU,” they add. “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.