Theresa May doesn't care if 'hard Brexit' hurts the City - there won't be special deals

Three senior, unnamed government sources have told Bloomberg that Theresa May will not cut any special deal with the City to ease the pain of Brexit and is seeking to fundamentally rebalance the relationship between Whitehall and financial services.

Bloomberg reports on Tuesday that May is taking a hard line with financial services and is unwilling to bend to their demands simply because of their economic clout. Financial services contribute £65 billion to the UK economy annually.

Here's a typical line from the Bloomberg report which sums up the government's seemingly hard stance:

"Inside the government, officials believe the impact of Brexit on the City will be to cut the size of a few bankers' bonuses, with only a few hundred jobs moving elsewhere in Europe. Voters would welcome rather than complain about such an outcome, one of the people said."

The story is yet another signal that Britain is heading for a so-called "hard Brexit," which would see Britain cut off all formal connections with the European Union and likely see the UK excluded from the single market. The EU has also signaled it would not be willing to cut a special deal with the City of London.

This would be devastating for financial services, which relies on both free movement of people for talent from the EU and passporting rights to do business across the 28-member bloc from the City of London. 5,500 companies with a combined turnover of £9 billion rely on passporting rights in the UK.

JPMorgan and UBS have already warned that thousands of jobs may have to be relocated away from Britain if the UK loses its passporting rights.

As well as the push of uncertainty and a stern government in Britain, finance firms are being wooed by other financial centers across Europe. France has said it will fast-track regulating companies looking to relocate from Britain, while Frankfurt and even Poland have also tried to tempt companies to relocate.

May's seeming hard stance on exit negotiations and the status of financial services has sent the pound tumbling for the second day in a row, reaching a fresh 31-year low on Tuesday.

You can read the full Bloomberg story here.