Theresa May warns EU: Keep City of London in Brexit trade deal or 'hurt your own economies'

‘Life is going to be different. In certain ways, our access to each other’s markets will be less than it is now’, Prime Minister admits

Theresa May warned the EU that refusing to include financial services in a trade deal after Brexit would “hurt” its own economies, but admitted the UK would lose some trade access to its biggest market.

In her third big Brexit speech, the Prime Minister sought to use the might of the City of London to strike what she called a “unique and unprecedented” partnership with the EU.

Ms May admitted Britain would not get everything that it wanted – acknowledging “there are choices to be made, there are some hard facts to be faced”.

“We are leaving the single market. Life is going to be different. In certain ways, our access to each other’s markets will be less than it is now,” the London audience was told, in a clear message to hardline Brexiteers.

But she also warned Brussels that shutting financial services out of a deal – as the EU’s negotiator has threatened – would backfire by harming the Continent as well.

“This is a clear example of where only looking at precedent would hurt both the UK and EU economies,” Ms May said.

Next week, the EU is almost certain to offer the UK a “Canada-style” deal only, threatening an exodus of financial services firms from the City, with a dramatic loss of tax revenue.

But the Prime Minister pointed out that London was “the world’s most significant financial centre” supplying “more than £1.1 trillion of cross-border lending to the rest of the EU”.

“The Chancellor will be setting out next week how financial services can and should be part of a deep and comprehensive partnership,” she said.

She admitted City firms would lose their crucial “passporting” rights to trade across the EU because that was “intrinsic to the single market of which we would no longer be a member”.

In a speech which refused to give ground on the key battles over the Irish border and the customs union, Ms May did announce plans to pursue associate membership of key EU agencies – at a price.

Staying part of the European Medicines Agency (EMA), the European Chemicals Agency and the European Aviation Safety Agency would involve “making an appropriate financial contribution”.

She also admitted it was the “only way” of ensuring swift approval of products and of avoiding delays to treatments because “it would mean these medicines getting to patients faster”.

However, she set up another likely clash with the EU by insisting “UK courts rather than the ECJ (European Court of Justice)” would resolve disputes involving EU firms.

On the controversy of the Irish border, the Prime Minister slapped down Boris Johnson by insisting: “We chose to leave; we have a responsibility to help find a solution.”

She gave no specifics, but argued for the UK to have the right to diverge, while asking the EU to take on trust that “the UK regulatory standards remain at least as high as the EU’s”.

Both wings of the Tory Party gave the speech a warm welcome, as did the Democratic Unionist Party, welcoming the refusal to give way on Northern Ireland.

“I welcome the Prime Minister’s clear commitment that she will not countenance any new border being created in the Irish Sea between Northern Ireland and the rest of the United Kingdom,” said Arlene Foster, the DUP leader.