The City is beginning to run out of options.

While Brexit looks set to end its use of the so-called financial services passport to access European markets, the other option, known as equivalence, is also looking shaky.

The Financial Times reported that the European Commission is considering making it harder for non-EU jurisdictions to win equivalence, which is approval for their legal regimes to be considered as tough as the EU's system, granting financial firms unfettered access.

Replacing full single market access with equivalence was always problematic, even before the EU considered toughening it, because it lacks certainty.

For a start, it is not certain that the UK will win equivalence. While the UK is compliant with EU financial rules, the approval powers have been known to be used politically rather than technically, which does not bode well for a country in trade negotiations with the EU.

The EU also has the power to pull equivalence from a jurisdiction at any time, making it hard for London-based banks and investment firms to plan ahead for periods longer than a few years.

Despite these problems, the UK had hoped that equivalence would play some role in keeping the European doors open for Britain's financial industry.

Last month Mark Garnier, a UK trade minister who played down these issues, told Bloomberg News that Britain would negotiate a "new model" of financial trade with the EU that would be better than passporting rights, that would involve some type of equivalence.

"If we can create a special hybrid version of that, with a better version of equivalence or a different version of passporting, then that’s what we will try to achieve. What we are not trying to do is fit into an existing box. We are trying to create a new model," Garnier said.

Prime Minister Theresa May's government has raised the possibility of a so-called "hard Brexit," which prioritises immigration controls over economic links such as the European Union's financial passport, which allows firms to use London as a base to sell their services to Europe.

The loss of membership of the single market could devastate the City of London. JPMorgan and UBS have both publically warned they may have to move thousands of jobs out of Britain if passporting rights are lost and Goldman Sachs is reportedly considering moving up to 2,000 staff. 5,500 UK firms with a combined turnover of £9 billion rely on passporting rights, according to the Financial Conduct Authority.