EU stance on deal for City of London is ‘manifestly absurd’, says former trade minister

  • A former U.K. trade minister says Brexit trade arrangements will be bespoke to Britain
  • Lord Maude adds that a deal for financial services industry will be complicated in nature
  • Wealth manager adds that sterling is the biggest Brexit risk for those allocating funds

The tough stance adopted by Brussels negotiators over the U.K.'s financial services industry does not make sense according to a former U.K. trade minister.

In September, the President of the European Commission, Jean-Claude Juncker, said there could be no "a la carte access" to the internal market when Britain leaves the European Union (EU) in March 2019.

Subsequently, a suggestion was made that a special immigration regime for workers within the City of London's financial services industry could be employed after Brexit, allowing them to continue to work across Europe easily, but the EU has again been cool on exemptions.

The U.K. is keen to protect its lucrative financial services industry and to maintain access to European markets but that outcome is far from certain.

Lord Francis Maude, former U.K. trade minister and now a senior advisor at law firm Covington, told CNBC Thursday that the situation for financial services was complicated and deserved specific attention.

"The EU has said for a long time that the U.K. cannot expect a bespoke deal. That is manifestly absurd. Every single trade deal that the EU has done with a third country has been a bespoke deal."

"So to say to the UK, which starts from a position of being able to comply with the single market, that you have got to pick from one of the agreements that are already on the shelf is simply nonsense," Maude added.

The former trade minister said he accepted that Brexit would mean a loss of some jobs for the City of London but separate opportunities would also arise.

Talks between the U.K. and EU have so far focused on the divorce bill that the U.K. will owe the EU, the future of the Irish-Northern Irish border and the rights of EU-UK citizens post-Brexit. Negotiations are soon to move on to a second phase focused on trade discussions and the U.K.'s future relationship with the bloc.

Pound to break out?

Since the vote to leave the European Union on June 23 last year, sterling has been the asset most dramatically affected.

Immediately before the referendum, the pound was worth $1.48 against the U.S. dollar. It slumped to around $1.20 toward the end of 2016 but has inched upwards in 2017 to now sit at around $1.34.

Chris Wyllie, chief investment officer of financial planning and investment management firm Connor Broadley told CNBC Thursday that fluctuations in sterling are the biggest issue for U.K. money managers.

"We can avoid U.K. domestic economic risk. We just invest overseas. What we can't avoid is this inherent currency question because we have to decide whether to hedge or not," he said.

On a purely technical basis, Wyllie said sterling, which has traded in a fairly narrow range of late, could well break out to the upside in coming weeks.

"If you look at the hive mind of the currency markets it is telling you they are looking a bit more optimistic in the pathways out of all of this. If we get some certainty on trade, then the pound will definitely rally," Wyllie added.