Barnier rules out special trade deal for UK

"There is not a single trade agreement that is open to financial services. It doesn't exist," Barnier was quoted by the Guardian.

This means British banks and financial firms will lose the 'passports' that allow them to trade freely in the EU.

British prime minister Theresa May held her first cabinet meeting on Tuesday devoted to what sort of agreement it wants with the EU after Brexit.

EU leaders last week gave a green light to start talks on the future relations, after the terms of divorce – on citizens' rights, the Irish border and financial settlement – have been agreed.

They urged the UK to spell out the future relationship it envisages with the EU, so that negotiations on that can start after the EU summit in mid-March.

Barnier's comments pour cold water on the UK's expectations on a wide-ranging bespoke post-Brexit trade agreement that would be tailored to accommodate the UK's desire to "take back control", while keeping some benefits of EU membership.

Earlier this month the UK's Brexit minister David Davis said Britain wants a trade deal with the EU that includes the best parts of the bloc's agreements with Japan, Canada and South Korea, along with financial services.

The EU has said that since the UK wants to leave the single market and the customs union as it leaves the EU, London can only choose from a number of already existing EU arrangements, such as with Norway, or Switzerland, or a free trade deal, like the one with Canada.

A so-called 'Canada, plus, plus, plus' agreement with the EU – which Davis has called for that would include the "best elements" of the EU's trade deals with Canada and South Korea, and would include services – is not on option for the EU.

Barnier told the newspapers, the bloc could see agreements accompanying the trade deal on judicial cooperation, defence and security and aviation.

The chief negotiator also reiterated that during a limited transition period, on which negotiations due to kick off in January, the UK would have to submit to all EU rules without having a say in them.

The transition period is likely to last until the end of 2020, which would coincide with the end of the current seven-year EU budget that the UK needs to pay into.

Barnier said the UK can start negotiating its own trade deals with third countries during the transition period, but those agreements cannot come into force.

The negotiator added that those third countries would likely want to see first what agreement the UK strikes with the EU before committing themselves to any deal with Britain.

The final EU-UK trade deal could be negotiated in two years, Barnier said, but that it would have to be ratified by 35 regional and national parliaments in the EU, which could take years.

Transition

The EU commission will on Wednesday (20 December) roll out the negotiating mandate for the transition period, after the EU summit last week give the go ahead for further talks.

An EU source said it is not expected to be much more detailed than the guidelines for the negotiations adopted last week by EU leaders, which set out a limited transition period during which the UK will have to adhere to EU rules.

One of the reasons for the limited detail is that the UK has not spelled out what sort of future relationship it wants at the end of the transition period, the source added.