UK cautions EU against financial "self harm" over Brexit

European companies would be the losers if the European Union tried to impose barriers on London financiers as such firms would be unable to access some of the deepest markets in the world, Cabinet Office Minister Michael Gove said on Thursday.

Britain left the EU on Jan. 31 but the main terms of its membership remain in place during a transition period until the end of this year, allowing it time to negotiate a new free trade deal with the bloc. "There are few places in the world where you have such a deep and broad capital market," Gove told the Brexit committee of the upper house of the British parliament.

"If it were the case that the EU chose deliberately to raise the barrier themselves on access for our financial services to their market, the losers would be investors in equities in EU companies who would not be able to get the very best price for any transaction that they wanted," Gove said. "It would be another example of potential self-harm on the EU's part," he said, adding that some finance rules, for example on bonuses, had been designed to cause harm to London.

Asked about the so called equivalence rules for financial services companies which, if granted, would allow some direct market access for London firms to continue from January, Gove said: "It should be relatively straight forward." Britain's chief negotiator David Frost said some "pretty hefty" documents had been exchanged and the constructive process was ongoing.

"We don't see why this need takes a long time, but we are in the EU's hands as to how long it takes," Frost said. "Equivalence is not a single binary equivalence or not - it is actually a more variegated picture," Frost said there was an equivalence question on clearinghouses for derivatives and synthetic products.