UK's Hammond reportedly warns of French move on City after Brexit

UK Chancellor of the Exchequer Philip Hammond has reportedly warned senior City figures to prepare for a French-led attempt by the EU to bind Britain’s financial services sector in red tape after Brexit and grab business from London.

He also told businessmen at a private meeting that they should not expect him to cut business taxes “for several years”, in spite of warnings from US banks that London was losing its competitive edge against New York, the Financial Times reported citing a note made of the discussion.

Hammond urged financial services chiefs to work with the Treasury and the Bank of England to develop “alternative pathways for growth” to compensate for any loss of business in Europe.

He also reportedly said that “current low US tax rates were unsustainable”, according to the note made at the meeting in Hammond's 11 Downing Street residence last month and seen by the newspaper.

Some senior figures in the Treasury believe Donald Trump will lose the next US presidential election and that the Democrats will reverse his tax cuts, removing any fiscal edge New York might enjoy over London.

Hammond predicted the EU would initially hold Britain close, to minimise disruption to the continent’s capital markets but Brussels would eventually pass regulations to hobble the City.

Britain would then have a choice of whether to comply with the new regulations or ignore them, with a consequent loss of EU market access.

“It is important that the UK is able to display in parallel, a strategy to grow non-European financial services business, such that the threat to pull out of EU arrangements is seen to be real,” Hammond is reported to have said.

The chancellor also claimed that it was only France that seemed interested in “politically motivated rule changes” because of the desire of Paris to seize business from London.

In June, France proposed that foreign investment banks based in third countries, such as the UK after Brexit, should not receive a blank cheque to operate in the EU and should face tighter controls.