There will be no special arrangement to allow City firms to trade freely in the EU if Britain leaves the single market, the European Commission's chief Brexit negotiator has said.
Theresa May had hoped to secure a bespoke trade deal which would enable City-based financial services companies to retain their 'passporting' rights, which enable them to operate freely in EU member-states. But Michel Barnier has apparently torpedoed this year.
Barnier has told several newspapers he is not open to a free trade agreement including financial services. "There is not a single trade agreement that is open to financial services. It doesn't exist."
"In leaving the single market, they lose the financial services passport."
Barnier also poke about single market regulations, saying: "we will not accept from the other side, regulatory competition against social rights, against environmental rights, against consumer rights and against fiscal regulations...or against financial stability."
Barnier did say he believed that a UK EU free trade deal could be agreed within the two-year transition, but added that it would have to be ratified by more than 35 national and regional parliaments across the EU27, each of which could use a veto.
Barnier's warning came on the eve of the first full Cabinet discussion of the "end state" which the UK is aiming for in the Brexit negotiations.
Theresa May had told the House of Commons the UK would leave the Common Agricultural Policy and Common Fisheries Policy (CFP) on Brexit, but Barnier has insisted that the UK must accept the "complete architecture" of the EU.
This includes the role of the European Court of Justice, free movement of people and the CFP - during the transition.
The Prime Minister has repeatedly made clear that she intends to take Britain out of the single market and customs union after Brexit, effectively ruling out Norway-style free access to trade with the EU27.
But she has suggested that a "deep and special partnership" with the remaining EU should be more extensive than the agreement struck with Canada in 2016, which covers goods but not services.