Europe's chief Brexit negotiator Michel Barnier kills off City hopes of keeping full access to EU markets

Europe's chief Brexit negotiator today sank City hopes of keeping the current full access to EU financial markets after Britain leaves in 2019.

Michel Barnier said there could be no “cherry-picking”, in a speech that turned Theresa May’s mantra, “Brexit means Brexit”, against her.

“On financial services, UK voices suggest that Brexit does not mean Brexit,” he said. “Brexit means Brexit. Everywhere.”

Mr Barnier also criticised the “contradictions” of Brexiteers who claimed Britain could change the rules and still keep the benefits of the European single market of 500 million customers.

He spoke out as Mrs May prepared to double her cash offer of an EU divorce settlement to around £38 billion in the hope that it will unlock talks with the union on a trade deal.

Mr Barnier dangled the offer of “a most ambitious free trade agreement”. But he said: “We take note of the UK decision to end free movement of people. This means, clearly, that the UK will lose the benefits of the single market. This is a legal reality.”

Mr Barnier said there could be “equivalence” in some areas, meaning that British financial standards may be recognised by the EU.

But he insisted: “The legal consequence of Brexit, the legal consequence, is that the UK financial service providers lose their EU passport.” He also emphasised: “We will not compromise on financial stability.”

Financial passporting allows firms to do business across the EU and the wider European Economic Area without having to be authorised in each country.

In a 30-minute speech, Mr Barnier said “the UK knows the rules”. He added: “They say there will be no changes in market access for UK-established firms, they say joint UK-EU rules would be decided in a new, symmetrical process... between the EU and the UK and outside of the jurisdictions of the European Court of Justice.

This would contradict the April European Council guidelines, which are my mandate, which stress the autonomy of the European decision-making, the integrity of our legal order, and of the single market.”

Mayor Sadiq Khan said: “This just shows how much of a mess the Government is in with their negotiations.”

Lib Dem leader Sir Vince Cable claimed: “Over 5,000 UK businesses and billions of pounds of tax revenue rely on financial passporting to access EU markets... all of this could be avoided if the Government chose to stay in the single market.”

Catherine McGuinness, the policy chairman of the City of London Corporation, said it was no surprise that passporting would go, but said the City was working on proposals to keep market access.

“Unlike any other country, the UK is looking to secure an agreement from the exact same starting point as the EU and so the UK’s new trading relationship with the EU should reflect this unique situation,” she said.

“This should be the foundation of a historic trade deal. It’s an ambitious plan, but it is one that will benefit the entire continent.”

She warned that if London were to “lose its crown as the world’s leading financial hub”, activity would move to rivals like New York and Singapore rather than EU hopefuls Pais and Frankfurt.

“Businesses and families would lose the benefits of deep and integrated financial markets, while fragmentation could potentially see costs rise.”