UK chief negotiator rules out fish for financial services Brexit deal

Britain’s chief Brexit negotiator has ruled out any deal giving European boats access to UK waters in return for better conditions for British financial services in the EU’s Single Market.

The EU and the UK are deeply divided over fishing in free trade negotiations ahead of the next round of talks, which start on Monday, David Frost told peers in the European Union Select Committee on Thursday.

Brussels also rejected British calls for an improved system of regulatory recognition for the City of London than the “equivalence” model currently on offer, during the last round of negotiations. Those talks ended in deadlock and mutual recrimination with both sides urging each other to drop their red lines. 

Leo Varadkar, the Irish prime minister, and Phil Hogan, the EU’s trade commissioner, have both suggested that a “fish for financial services” compromise could be struck to break the deadlock between the two sides. Mr Hogan, who is Ireland's EU commissioner, said yesterday, "Perhaps the United Kingdom has come to the conclusion that there’s not going to be a deal.”

“I don’t think fisheries is something we are going to link to anything,” Boris Johnson’s top Brexit official said. 

The Political Declaration, a joint document for the trade talks, said that a deal on fishing and financial services should be completed by July, ahead of the end of year deadline for the trade deal to be finalised. 

Mr Frost said he thought the deadline would be missed and repeated that the UK would not ask for an extension to the transition period to allow time for more trade negotiations beyond December 31.

“I'm sure we'll carry on talking after June 30. Obviously, at some point, there will need to be a negotiation on the arrangements for 21, whether there's an agreement or not,” Mr Frost said.

“If there isn't an agreement that will reflect the fact that we're in the independent coastal state, and we'll control access, and fishing in our waters at that point.”

He added, “So, that is the reality that we have to contend with, if the EU doesn't evolve its position and try and reach an agreement with us.”

Britain wants a Norway-style fishing agreement with the EU with annual negotiations on fishing opportunities, based on zonal attachment. Zonal attachment is a system of evaluating fish stocks based on where fish currently are rather than the system of historic catch patterns that underpins the EU’s Common Fisheries Policy. 

The EU wants a fishing agreement “under existing conditions” with reciprocal access to UK waters and no zonal attachment, which would benefit British fishermen. Michel Barnier has also ruled out annual negotiations. 

Financial services represents a far larger part of the UK economy than fishing, which comprises less than  1 percent of GDP but the Government has promised that Brexit will mean the revival of the totemic industry. 

700,000 tonnes of fish and shellfish are caught each year by EU boats in UK waters and about 70 percent of the catch by British boats is sold to the EU market. 

“You may have to make concessions in areas like fishing in order to get concessions from us in areas like financial services,” Mr Varadkar said in January after Mr Hogan suggested a last minute compromise was possible.  

In the last round of Brexit talks, UK negotiators demanded Britain be consulted on any equivalence decision on financial services. Equivalence can be withdrawn in as little as 30 days notice in some areas by the European Commission and without a right of appeal. 

Mr Barnier described the British demand as a failure to understand the consequences of Brexit. 

Micheal Gove, who spoke at the Select Committee with Mr Frost, said that the EU risked harming itself if it froze the City of London out of the Single Market. 

Raising barriers to London’s deep and broad capital markets would drive up costs for investors in EU companies, the Chancellor of the Duchy of Lancaster said. 

“It would be another example of potential self-harm on the EU’s part,” he said.