The U.K. government has proposed to end one of the most-cheered privileges of the financial industry, according to a new document Thursday, as it tries to speed up negotiations to leave the European Union.
In a white paper, the U.K. government proposed new trade arrangements with the EU to come into force when it leaves the 28-member bloc. Under the proposal, the U.K. and the EU will retain the current agreements to trade goods but not services.
“The government’s vision is for an economic partnership that includes … new economic and regulatory arrangements for financial services, preserving the mutual benefits of integrated markets and protecting financial stability while respecting the right of the U.K. and the EU to control access to their own markets — noting that these arrangements will not replicate the EU’s passporting regime,” the paper states.
The EU’s passporting regime allows financial services firms based in the U.K. to have clients in the EU. Ending this regime means that the City of London will need extra licenses to serve EU-based customers.
This could be particularly problematic for international banks, such as U.S. firms, who have relied mostly on their big London-based offices to serve European clients.
The chairman of the City of London Corporation Policy said that the proposal is a “real blow for the U.K.’s financial and related professional services sector.”
“With looser trade ties to Europe, the financial and related professional services sector will be less able to create jobs, generate tax and support growth across the wider economy. It’s that simple,” Catherine McGuinness said in a statement Thursday.
According to the government’s paper, around £1.4 trillion ($1.98 trillion) of assets are managed in the U.K. on behalf of European clients.
Some firms have started making preparations in case the passporting rights are limited or lost, including moving employees to European capitals and hiring new staff in those locations. However, after Thursday’s proposals some companies might step up their post-Brexit plans.
The U.K.’s proposal will be discussed next week with European negotiators in Brussels. Until both sides reach an agreement over Brexit, nothing is set in stone.