Brexit: Phillip Hammond says he will fight an EU swoop on City of London trade

Rob Merrick
The EU fears its regulators, after Brexit, will not have same ability to watch over the City of London: Reuters

The Chancellor has opened up a new front in the Brexit war with Brussels by warning Britain will fight a swoop on a lucrative trade in the City of London.

Philip Hammond claimed a plan to curb London’s dominance in clearing euro-denominated transactions risked economic growth and stability across the entire continent.

“London is the world’s number one financial centre with high standards of financial supervision, including longstanding cooperation with EU institutions,” he said.

“This benefits the entire continent. We trust everyone in the negotiations will see the value in not undermining that.”

The EU’s proposals – in documents seen by The Independent yesterday – are widely seen as an attempt to force UK clearing houses to move across the Channel or submit to regulation from Brussels.

If successfully, they would deal a sharp blow to the City’s status as a global financial hub, as Brexit gets underway.

Mr Hammond’s warning comes just one day after Theresa May’s extraordinary attack on the EU for attempting to alter the course of the general election on June 8.

Meanwhile, in what will be seen as a further provocation, it emerged that Brussels will demand the UK must pay for the cost of the negotiations, including travel bills.

The formal Brexit talks should be conducted in rigorous four-week cycles, in Brussels, with progress published once a month, according to proposals seen by the website.

The draft Commission document, published today, calls for beefed-up supervision of clearing houses, with legislation expected to follow next month.

At much as 75 per cent of euro-dominated derivatives are cleared in the UK, mainly at the LCH clearing house, worth hundreds of billions of pounds a day.

The EU fears its regulators, after Brexit, will not have the same ability to step in and calm markets, either through increased supervision or extra funding.

A previous attempt to force big clearing houses to relocate to the continent was thrown out for being contrary to the rules of the single market – which Britain now plans to leave.

In a statement in response, Mr Hammond, Chancellor of the Exchequer said: “We approach the Brexit negotiations with a spirit of goodwill and we will consider any EU proposal before we leave on its merits.

“But we should be careful of any proposals which might disrupt growth, raise the cost of investment in Europe and the UK or weaken financial stability.”

Clearing houses are positioned between the two parties involved in a financial transaction and effectively safeguard completion of a deal even if one side goes bust.

The Chancellor spoke out after the European Commission rejected the Prime Minister’s claim that Brussels officials are trying to influence the result of the election.

“This election in the United Kingdom is mainly about Brexit. But we here in Brussels, we are very busy, rather busy, with our policy work,” a spokesman said.

“We have too much to do on our plate. So, in a nutshell, we are very busy. And we will not Brexitise our work.”