UK and EU set for clash on fish and financial services

Leo Varadkar, Ireland’s prime minister, on Monday set up a “fish for finance” Brexit clash between Britain and Brussels by suggesting that the City of London could lose access to European markets unless the UK opens up its coastal waters to EU boats.

Britain has long suspected that Brussels would this year demand continued EU access to the UK’s fish-rich waters as a condition of a future trade deal, with an explicit link being drawn to an agreement on financial services.

Mr Varadkar, speaking to the BBC, said on Monday: “The UK has a lot of waters and a lot of fish is taken out of your waters by boats from other countries. But bear in mind that 70 per cent of the fish you sell, you sell into Europe.

“That’s an area where you are in a strong position. An area where you’re in a very weak position is one of the most valuable parts of the British economy — financial services.

“You may have to make concessions in areas like fishing in order to get concessions from us in areas like financial services. That’s why things tend to be all in the one package.”

The collision on fish and finance issues was set up in last year’s political declaration between Britain and the EU on future relations, which stated that agreements on both areas were a priority and should be settled by July.

Downing Street said on Monday it stood by the declaration but insisted the precise timetable for negotiations was still to be agreed between the two sides. The UK hopes to stop Brussels using the sequencing of trade talks to the EU’s advantage.

Boris Johnson’s spokesman said that after Brexit the UK would take control of its coastal waters, but did not exclude the prospect that EU fishermen could continue to operate in them as part of a future agreement.

“It will be for the UK to determine who fishes in our waters,” added the spokesman.

Britain’s financial services industry hopes to maintain a close relationship with the EU, but it will not enjoy the same level of access as under the bloc’s single market, which includes a so-called passporting regime. This allows banks and other financial companies authorised in one EU member state to trade freely in another.

The UK and EU are expected to forge post-Brexit market access arrangements for the industry based on the concept of “equivalence”.

This would give Britain the opportunity to develop a discrete regulatory regime for financial services, and the ability to diverge from EU rules, although Brussels warned in December that UK access would depend on it “not starting to engage in some kind of deregulation”.

Britain has meanwhile refused to offer Brussels any promises on access to UK coastal waters, where more than 700,000 tonnes of fish and shellfish are caught each year by EU boats.

After December 2020, Britain will withdraw from the EU’s common fisheries policy — which has dictated where UK boats can operate and how much they can catch — for decades.

British officials believe the adoption of a Norway-style model, which would involve annual negotiations with the EU on quota rights and access, would allow the UK to “take back control” of its coastal waters. Britain would also seek a larger quota compared with under the common fisheries policy.

However, the EU is likely to oppose the uncertainty for the bloc’s fishermen each year and is expected to call for preservation of the status quo.

Britain could refuse to strike an agreement and go its own way, but such a scenario would probably lead to the imposition of EU tariffs. It could also lead to the UK being forced to patrol and defend its coastal waters against EU boats.

After talks in Dublin on Monday with Mr Varadkar, EU chief Brexit negotiator Michel Barnier said he would next Monday circulate a draft negotiating mandate to European capitals for the trade talks with the UK.

“Let me recall that the UK is leaving 600 international agreements,” he said. “We have to rebuild everything in our common interest.”

Mr Varadkar said Ireland would be a “friend to the UK” after Brexit, but would be on “team EU” in the trade talks.

He added: “If you see this as a contest the EU is in a very strong position . . . But I don’t think we have to see it as a contest. There is a possibility for us to work together with the UK over the next few months and come to a future relationship and a trade agreement that’s mutually beneficial.”

Mr Varadkar called for “realism” in the trade talks, saying time was very short and that achieving a deal by Mr Johnson’s deadline of December 2020 will be “very challenging”.