London-Remarks made by British finance officials, who have participated in consultations held with the Treasury and the newly created Brexit department, have revealed that the government has begun considering leaving the single market for the first time.
A series of discussions have been held between the Chancellor Philip Hammond and top business lobby groups including the Confederation of British Industry (CBI), the British Bankers’ Association (BBA) and City of London Corporation to determine the value of the single market and whether so-called passporting rights are worth “fighting for,” The Sunday Telegraph reported.
Passporting allows UK-based banks to set up branches in any part of the European Economic Area, which includes the EU, plus Norway, Iceland and Liechtenstein, without having to be separately authorized by each nation.
According to the newspaper, officials say the talks have revealed a willingness among some top figures to scrap passporting despite early calls to stay in the single market from some quarters.
The City of London Corporation’s policy chief, who attended the meeting last month, said the issue of passporting was key for the Treasury.
Mark Boleat said: “It’s no good having a wish list that’s not realistic – that’s not what the Government wants. What it wants to know is: does Brexit mean the loss of 5pc of investment banking jobs? In which case – OK.
“If it means the loss of 30pc of these jobs, then what’s the implication of tax revenue? Is passporting worth fighting for?”
However, Boleat cast doubt over the UK’s ability to secure a Norway-style deal to remain in the single market. He said accepting free movement of people and paying large sums to Brussels while accepting its rules would not be politically acceptable.
The BBA wants the UK to leave the single market but retain unimpeded access to EU markets. The compromise would give British authorities control over UK regulation while giving EU customers access to the City.
“We are not calling for membership of the single market – what we want is full two-way access to EU markets. The so-called Norway option would provide greatest continuity for banks and their customers, because basically the current passporting regime would continue to apply,” said the BBA’s chief executive Anthony Browne.
The Association of British Insurers wants to maintain access to EU staff but has yet to decide where it stands on passporting.
Officials keen to leave the single market are set to clash with other City leaders. Top banks have warned of the potential cost to the UK’s financial sector if the UK loses these rights. Barclays has said it would set up “alternative arrangements” in other EU countries, while Carolyn Fairbairn, the CBI director general, is pushing its case to remain in the single market.
Officials want to draw up a plan of action before Article 50 is triggered and negotiations begin in earnest.
The report came as a survey showed on Friday that Britain’s labor market entered “freefall” after the vote to leave the EU, with the number of permanent jobs placed by recruitment firms last month falling at the fastest pace since May 2009.
The monthly report from the Recruitment and Employment Confederation (REC) showed starting salaries for permanent jobs rose in July at the slowest pace in more than three years.
Overall, the survey added to evidence that business confidence and activity slowed sharply after the June 23 vote to leave the European.
“The UK jobs market suffered a dramatic freefall in July, with permanent hiring dropping to levels not seen since the recession of 2009,” said REC chief executive Kevin Green. “Economic turbulence following the vote to leave the EU is undoubtedly the root cause.”
The survey suggested businesses were focusing more on hiring short-term staff because of the uncertainty.
Green said it was important not jump to conclusions from a single month’s data.
“The truth is we don’t know what long-term consequences the referendum result will have on UK jobs,” Green said, pointing out that political stability and Bank of England action might bolster confidence in the labor market.
The Bank of England cut interest rates to next to nothing on Thursday and unleashed billions of pounds of stimulus to cushion the economic shock from Britain’s vote to leave the European Union.