The UK government's new blueprint for Brexit is a "real blow" to London's all-important finance sector as it will damage jobs, tax revenues and growth, a City official said today.
"Today's Brexit white paper is a real blow for the UK's financial and related professional services sector," Catherine McGuinness, policy chairman of the City of London Corporation, said in a statement.
"With looser trade ties to Europe, the financial and related professional services sector will be less able to create jobs, generate tax and support growth across the wider economy," she said.
Around £1.4 trillion (€1.58 billion) of assets are managed in Britain for European clients, the government's "white paper" noted, and the City hosts most of the EU's trading for banks and insurance companies.
But the paper conceded that City firms will lose their "passporting" rights to operate freely across the EU, once Britain exits the bloc's single market after Brexit in March 2018.
But it also said that because of the deep cross-Channel links, "equivalence" was also insufficient.
That refers to special bilateral arrangements already used by financial firms from Wall Street, Japan and China, whereby they agree to meet EU rules to keep access to the common market.
Therefore, the blueprint called for a hybrid arrangement that would adopt equivalence but also recognise "extensive supervisory cooperation and regulatory dialogue" between Britain's financial watchdogs and their EU counterparts.
"The sector has been clear since the referendum - equivalence in its current form is not fit for purpose so any 'enhancements' to this regime would have to be substantial," Ms McGuinness said.
The UK government has stressed its intent to conclude a new accord with the EU to cover manufactured goods.
But services including financial services such as accounting and insurance account for three-quarters of the British economy.
"It's in the interests of households and businesses on both sides of the Channel that an ambitious future trading relationship, covering services as well as goods, is secured," McGuinness said.
"Time is running out so it is essential that the pace of negotiations accelerates to ensure an orderly Brexit.
Both sides should engage constructively to deliver a deep and comprehensive relationship covering services, not just goods, for the benefit of consumers and citizens across Europe," she added.