The EU’s chief negotiator has said the bloc is “ready” to offer Britain an “ambitious” free trade deal – but the UK will lose one of the advantages currently enjoyed by the City.
Michel Barnier said, if an agreement is to be signed after the UK leaves the single market, there has to be a “level playing field” with the EU, and the Government must not ditch European standards or so-called red tape.
And he warned there would be no “cherry picking” of the elements of the single market Britain wanted to keep.
As a result, he added, the UK will have to lose the so-called “EU banking passport” – which allows British banks full access to the market for financial services across the bloc.
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A survey of City of London-based financial services firms by Reuters in September found that nearly half said they would have to move staff or restructure their businesses if the UK’s sector loses the privileges it has enjoyed as part of the single market.
Mr Barnier said the UK faced an “important and decisive” choice as it prepared for the talks with the EU to move on to trade.
He said: “There will be no ambitious partnership without common ground on fair competition, state aid, tax-dumping, food safety, social and environmental standards.
“If we manage to negotiate an orderly withdrawal, fully respecting the integrity of the single market and establishing a level playing field, there is every reason for our future partnership to be ambitious. This is our preferred option.
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“This is why we have started internal preparations with member states, to be ready to talk about the future as soon as we will have agreed on how to settle the past.
“The EU will, of course, be ready to offer its most ambitious FTA (free trade agreement) approach.”
But, he warned that while Brussels would be ready for a no-deal outcome, it would not be a positive result.
“I regret that this no-deal option comes up so often in the UK public debate,” he said.
“Only those who ignore, or want to ignore, the current benefits of European Union membership can say that no deal would be a positive result.”
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Mr Barnier’s speech to the Centre for European Reform think tank came as a Cabinet committee meets to discuss whether to raise the amount the UK is prepared to offer the EU to settle its bill.
Theresa May is thought to have offered nearly £18bn, but it emerged over the weekend the Prime Minister may be prepared to double the offer.
The Brexit pay-off is one of the three issues that have to be agreed before the EU is willing to move the talks on to trade, along with the rights of expats and the Irish border.
Mr Barnier suggested there was still much work to be done before an agreement can be reached on the Ireland/Northern Ireland border.
“I expect the UK, as co-guarantor of the Good Friday Agreement, to come forward with proposals,” he said.
“The island of Ireland is now faced with many challenges.Those who wanted Brexit must offer solutions.”
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It came just two days after Irish Prime Minister Leo Varadkar told Sky News an agreement on the border and the financial settlement was not “close”.
Mrs May said: “We’ve already made progress on a number of areas we’ve been negotiating on. There’s more that we will be talking about. But what I’ve very clear about is that the EU and the UK should move forward together on these issues.
“We want to build a deep and special partnership with the European Union for the future. That would be good for industries, for jobs, across the country and it will also be good for the European Union.”
The £36bn is well short of the €60bn (£53bn) originally sought by Brussels.