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Brexit seems to be heading towards a no-deal, former EU official warns

Key Points
  • The U.K. is seeking a trade deal with the EU to ensure that businesses on both sides of the English Channel will not face high tariffs. However, there is no clarity yet as to how financial services will work.
  • A collapse in Brexit talks could mean that financial services firms based in the U.K. face restrictions in serving EU-based customers.
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Dijsselbloem: Worried about short-term and long-term impacts of Brexit

Brexit is a cause for concern as negotiations seem close to a no-deal, the former head of the Eurogroup told CNBC on Thursday.

The U.K.'s exit from the European Union, scheduled to occur in March, is at a critical moment as negotiators try to conclude talks before November.

But deep differences, on issues such as the Irish border, have raised doubts about whether an agreement will be reached.

"I am very worried about the outcome of the Brexit process. We seem to be heading towards a no-deal situation," Jeroen Dijsselbloem, who led the group of 19 euro zone finance ministers for five years until January, said.

"Even if there is a deal… the worst the trade deal is, the more the impact will be on the financial services sector relations between the City (of London) and the EU," he told CNBC's Joumanna Bercetche.

The U.K. is seeking a trade deal with the EU to ensure that businesses on both sides of the English Channel will not face high tariffs. However, there is no clarity yet as to how financial services will work.

The U.K. has proposed to remain part of the EU single market — the common area where goods, services and people move freely — but only to exchange products, not financial services. The EU has rejected that idea, arguing the U.K. cannot "cherry-pick."

"I am worried about the disruption that will come from that in the short-term, I am also worried about the longer-term prospects because we still don't have well-developed integrated capital markets in Europe," Dijsselbloem said.

A collapse in Brexit talks could mean that financial services firms based in the U.K. face restrictions in serving EU-based customers.