THERESA MAY’S speech on January 17th set Britain definitively on a path to a “hard” Brexit, in which it will leave not just the EU but the European single market. This was not what the City of London wanted to hear. The prime minister did at least pick out finance, along with carmaking, as an industry for which “elements of current single-market arrangements” might remain in place as part of a future trade deal. The City is holding out hope that a bespoke deal built on the existing legal concept of “equivalence” could still accord it a fair degree of access to Europe.

“Passporting”, which allows financial firms in one EU member state automatically to serve customers in the other 27 without setting up local operations, was always going to be difficult after Brexit. Outside the single market, says Damian Carolan of Allen & Overy, a law firm, the “passport as we know it is dead.” Already, two big banks, HSBC and UBS, this week each confirmed plans to move 1,000 jobs from London.

Financial companies all have to firm up their contingency plans. For the City, these focus on so-called “equivalence” provisions, allowing third-country financial firms access to the EU if their home country’s regulatory regime is deemed equivalent. Currently only some regulations, such as those governing clearing houses and securities trading, contain the provisions. Much of finance, notably bank lending and insurance, is not covered. And even where the provisions exist, applying them will, in effect, be a political decision.

Optimists hope equivalence could not just form the basis of a feasible deal, but might even allow Britain to remove some onerous regulations. Jonathan Herbst of Norton Rose Fulbright, another law firm, notes that precedents exist for “variable geometry” in regulation. For instance, to gain access to American clients, some British clearing houses already submit to partial American regulatory oversight. If they deal in euro-denominated trades, nothing seems to stop them from submitting to, say, direct oversight by the European Central Bank without leaving London.

Such proposals may be stymied by cold political considerations. Equivalence determinations are at the full discretion of EU regulators, and the status can be withdrawn at short notice. Britain, as a current EU member, starts with identical rules. In a charged political environment, even a small future divergence could be construed as moving away from equivalence. For all the creative solutions proposed by lawyers in London, Europeans are not minded to let Britain off the hook by allowing it easily to “cherry-pick” sectoral carve-outs. Even before the Brexit referendum in June the ECB had sought to move euro clearing into the euro area.

Yet that is not a reason to dismiss equivalence altogether. It would seem strange, as Mr Herbst points out, to admit Canadian banks into the EU on the back of the recent EU-Canada free-trade deal under better terms than British banks. (Indeed, many Canadian banks have their main European presence in London.)

Even on clearing, it is more likely that euro-denominated derivatives would move to New York rather than continental Europe. According to Mr Carolan, it would be tricky for the ECB to stop this unless it were to forbid European banks from using non-European clearing houses, which would deprive them of access to liquidity. It might be in the ECB’s interest, then, to agree on a bespoke arrangement on clearing. Other financial-market activities may prove harder nuts to crack—especially if, as seems possible, broader Brexit negotiations descend into acrimony.