Germans warn UK banks as Theresa May pleads with US firms

Banks based in Britain will lose access to EU markets after Brexit unless the country remains in the broader European trading group that includes nations such as Norway, the head of Germany’s Bundesbank warned yesterday.

Jens Weidmann, signalling a tough line from Germany on the Brexit divorce talks to come, said Britain would need to be in the European Economic Area (EEA) to keep the so-called passporting rights that allow its banks sell their services across the EU.

The EEA is the trading club comprising the 28 EU states plus Norway, Iceland and Liechtenstein, three non-EU nations who can access the bloc’s single market in return for applying its rules and accepting the free movement of EU citizens.

“Passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area,” German central bank chief Mr Weidmann, who is also on the governing council of the European Central Bank, said.

That warning coincided with British prime minister Theresa May setting up meetings with some of the biggest US companies in New York to attempt to reassure them that Brexit shouldn’t be a reason to pull investment from the UK.

Aside from attending the UN General Assembly, Ms May will meet Goldman Sachs, Amazon, BlackRock, IBM and Morgan Stanley.

Meanwhile, a new survey from Lloyds Bank yesterday showed British companies scaled back their investment plans in the month after the Brexit vote; a further sign the decision is likely to have a lasting impact on the UK economy.

The bank’s overall business confidence index, which averages the expected sales, orders and profits of 1,500 companies over the next six months, fell to a four-year low of 12%, from 38% in January.

Companies taking part in the survey, mostly SMEs, expected to export less and were much less likely to hire or increase capital spending.

Businesses in the service sector, Britain’s largest, were the worst hit as their confidence dropped 30 points on average.

Lloyds said Brexit uncertainty is set to continue for the foreseeable future. n Reuters and Bloomberg