UK’s EU negotiator Michel Barnier. Picture: REUTERS
UK’s EU negotiator Michel Barnier. Picture: REUTERS

On Thursday, the EU’s chief Brexit negotiator Michel Barnier denied a report claiming that London and Brussels had reached a preliminary agreement covering financial services and data.

The Times newspaper said a deal had been struck that would see UK financial services companies retain access to EU markets after Britain leaves the bloc in March.

Such a deal would guarantee British companies access to EU markets as long as domestic regulations remained broadly aligned with those set by Brussels — an arrangement called “equivalence”.

Barnier called the report “misleading”, while British Prime Minister Theresa May’s spokesperson played it down as “speculation”. “Misleading press articles today on Brexit & financial services,” Barnier wrote on Twitter. “Reminder: EU may grant and withdraw equivalence in some financial services autonomously. As with other 3rd countries, EU ready to have close regulatory dialogue with UK in full respect for autonomy of both parties.”

British government officials were more positive.

May’s spokesperson called The Times report “speculation”, but added: “While we continue to make good progress, agreeing new arrangements for financial services negotiations are ongoing.”

The pound started to rally following the report’s publication. It extended those gains on a signal from the central bank that it stood ready to raise rates in response to early signs of the economy over-heating.

The pound stood at a weekly high of about $1.2921 at about 12.30pm GMT. The day’s rise of 1.2% was the highest since February, according to Bloomberg data.

British optimism

Financial services are a major part of Britain’s economy and access to European markets has been a key concern in the Brexit negotiations.

Currently, the EU would be able to withdraw market access with a month’s notice if it decides that a partner country no longer has equivalent financial services regulations.

The report in The Times suggested that neither London nor Brussels would be able to declare unilaterally that regulations had fallen out of equivalence and block access to their markets without first going through independent arbitration and a notice period “significantly longer” than one month.

Britain’s Brexit minister Dominic Raab believes a divorce deal with Brussels could be struck by November 21, it emerged on Wednesday, prompting EU leaders to warn this would require a breakthrough within days.

In a letter to a parliamentary scrutiny panel, he wrote: “I would be happy to give evidence to the committee when a deal is finalised, and currently expect November 21 to be suitable.” But Raab’s ministry later admitted there was “no set date for the negotiations to be concluded”.

Most of the Brexit deal with Brussels is agreed but talks remain stuck on how to avoid new checks on Britain’s land border with EU member Ireland after it leaves the bloc’s single market and customs union. Analysts said reaching a preliminary services agreement with the EU could ease May’s job of convincing lawmakers to approve any Ireland border deal.