Britain cannot have a special deal for the City of London, the European Union’s chief Brexit negotiator has told the Guardian, dealing a blow to Theresa May’s hopes of securing a bespoke trade agreement with the bloc.



Michel Barnier said it was unavoidable that British banks and financial firms would lose the passports that allow them to trade freely in the EU, as a result of any decision to quit the single market.



“There is no place [for financial services]. There is not a single trade agreement that is open to financial services. It doesn’t exist.” He said the outcome was a consequence of “the red lines that the British have chosen themselves. In leaving the single market, they lose the financial services passport.”

Quick guide What trade models could the UK follow? Show Hide Norway is the best example of a country that is outside the EU, but only just. As a member of the European Free Trade Association (EFTA) it achieves most of the economic benefits of single market membership, yet is required to adopt most of the EU rules as a result. This includes a requirement to allow freedom of movement, which is why those who favour its adoption by Britain like to speculate whether it can be watered down to 'Norway minus'. Brexiteers prefer to come from the other direction. They take the EU’s recent free trade agreement with Canada, known as CETA, as a starting point. It focuses on reducing tariffs for physical goods rather than dealing with the non-tariff barriers that matter to Britain’s services sector. But since UK regulations are already entirely aligned with the EU, optimists argue that it ought to be possible to add services and much else besides to achieve 'Canada plus plus plus'.

The stark declaration quashes the hopes of the Brexit secretary, David Davis, for a unique trade deal that would include financial services. The Brexit secretary has called for a “Canada plus plus plus” deal with the EU, a reference to the free trade agreement struck between Ottawa and Brussels in 2016, but with the crucial addition of financial services.



In an exclusive interview with European newspapers, including the Guardian, Barnier gave examples of his own three pluses – judicial cooperation, defence and security and aviation.



The negotiator also said:

A trade deal could be agreed within a two-year transition period, but would have to be ratified by more than 35 national and regional parliaments.



The UK could not stop Brexit unilaterally, arguing that overturning the decision to leave would require the consent of 27 EU member states – a view at odds with one of the authors of article 50, Lord Kerr.



The UK must follow all rules and regulations of the EU during the transition period, including new laws passed after the UK has left.



The UK could negotiate trade agreements with the rest of the world during the transition, but they could not come into force.

He would not confirm British estimates that the final Brexit bill – the UK’s outstanding obligations to the EU – would be no more than €45bn (£39bn).



Barnier was speaking three days after EU leaders agreed the UK had made enough progress on the Brexit divorce – citizens’ rights, the Brexit financial settlement and the Irish border – to allow talks on the future.



He said the next key moment would be an EU summit in mid-March, when EU leaders are due to sign off guidelines that will lay out red lines and hopes for the future. “I hope very much that we will have a clear position from the British government by this time.”

His tough warning on what the UK can expect from a future relationship comes on the eve of the first full cabinet discussion on Britain’s future relationship with the EU. After a meeting with her Brexit “war cabinet” on Monday, government sources said they wanted a “bespoke and ambitious” trade deal.

British government sources claimed Davis would not allow the commission to “cherry-pick some sectors” in negotiations. They insisted the Brexit secretary would not allow services, which make up almost 80% of the UK economy, to be separated from goods.

They also argued that ministers had been holding a series of meetings with individuals in each of the EU member states, and felt confident that a number of countries dependent on trade with Britain would be making the case internally for a close agreement.

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In a move that will infuriate cabinet Eurosceptics, Barnier said the UK must accept all EU law, including new directives and regulations adopted after British ministers and MEPs are no longer part of the EU decision-making process. “The same rules for everyone – this is the spirit of the transition.”

During the transition, the UK must accept the EU’s “complete architecture”, including the role of the European court of justice, free movement of people and the common fisheries policy. “It will be essentially the economic status quo,” he said.



Any new trade deals the UK signs will not be able to come into force during the transition. EU officials think this is a theoretical point, because other countries will not be able to complete deals with the UK without knowing what London has agreed with the EU. “We have already had contacts with third countries and they want to know what will be the nature of the relationship between the EU and the UK,” Barnier said.



He had “listened” to the British government’s request for a two-year transition – a call backed up by Ireland’s prime minister, Leo Varadkar, who recently argued the UK’s transition should be limited to two years with no prospect of extension.

Barnier was speaking to seven newspapers at the same glass table where the Brexit secretary and his team were photographed without notes, facing an EU side with tidy piles of folders. On his desk was a red mug emblazoned with “keep calm and negotiate” – a phrase Barnier likes to use.

Facebook Twitter Pinterest Barnier, Davis and their delegations at a meeting in Brussels. Photograph: Reuters

Outside the door was a British flag, left over from the frantic shuttle diplomacy of the last fortnight. Usually only the 27 other EU flags are on display, but the union jack is brought out when British negotiators come to Brussels.

Despite this courtesy, Barnier stressed the EU would not compromise in protecting its rule-making powers and guarding against competition from the UK through lower taxes or weaker standards.



If the British red lines remained the same, he said there would be consequences. “We will not accept from the other side, regulatory competition against social rights, against environmental rights, against consumer rights and against fiscal regulations ... Or against financial stability.”

“We will not accept chlorinated chickens, nor other products that do not meet our food standards.”

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Barnier said British red lines on leaving the ECJ and ruling out free movement of people meant the only option was a free-trade agreement similar to one the EU agreed with Canada in 2016. Setting out a paper he had shown to EU leaders last Friday, he said the UK had made its own choice, but stressed these red lines had been laid down in May’s speeches, not the negotiating table.



His words pour cold water over May’s insistence that the EU and the UK could do “so much better” than the EU-Canada deal. British banks are also piling pressure on the government for “a far more ambitious deal” than the Canada model offers.



He said the UK’s decision on the future relationship would determine how easily it was accepted by the rest of the EU, revealing for the first time that a UK-EU trade deal would require ratification by national and regional parliaments.



Under EU law, some treaties can be ratified by governments and the European parliament only, but deals that touch on national competences are deemed to require the approval of national and regional parliaments.



In a blow to remain campaigners, Barnier contends that the UK would be unable to revoke article 50 unilaterally – a view at odds with the veteran British diplomat Lord Kerr, who wrote the famous treaty text and insists the UK can withdraw its decision to leave up until the last moment of departure. Asked whether the UK could unilaterally revoke article 50, Barnier said: “The clock is ticking. No changes in the process can be unilateral, they must be collective.”

Barnier said he very much regretted the British decision to leave the EU and recalled campaigning for Britain’s membership of the European Economic Community in 1972 – when France held a referendum on new joiners.

Since his first public appearance as the EU’s chief negotiator, he said he had always stressed “the decision would have consequences – human, social, economic, fiscal, financial, technical, judicial. I have always recommended that no one should underestimate them.”