Getting best Brexit deal for banks "absolute priority" - UK minister

By William James and Huw Jones LONDON (Reuters) - Getting the best deal for the City of London will be an "absolute priority" in Brexit trade talks with the European Union, Britain's financial services minister said on Tuesday as banks warned they may start moving from London next year. Over 400 members of London's financial industry gathered at a special conference in the heart of the city's banking district, laying bare the extent of their worries about the impact of Britain's EU exit on the country's most important economic sector. Britain is due to give formal notice of its intention to leave the EU by the end of March, leaving two years for negotiations to reshape the relationship with its biggest trading partner. The future of the financial services sector is expected to be one of the key areas of discussion. "Can the UK still be one of the best financial centres anywhere in the world, even if we're outside the EU? Well, let me say this is an absolute priority for this government," financial services minister Simon Kirby told the conference. British Prime Minister Theresa May last week appeared to prioritise curbs on immigration from EU countries over preferential access to the bloc's single market, a step EU leaders say would make it impossible for banks in Britain to have continued unfettered access to the EU market. Banks fear losing their ability to offer services across the EU from a base in London, known as passporting, would crimp the City of London's role as the world's top financial centre and could force them to shift some operations to other EU states. "Their hands are hovering over the relocate button," Anthony Browne, chief executive of the British Bankers' Association, told a conference. Kirby said maintaining Britain as a top financial centre was an "absolute priority" for the government, He said the government acknowledged banks' need to hire top talent from across the world and urged the financial sector to talk with the government in a spirit of "constructive collaboration". "We will listen to you," he said. "We are confident we can weather any storm that comes our way." Nearly 2.2 million people work in financial services in Britain and the sector contributed 190 billion pounds ($240 billion), or 11.8 percent of output, to the British economy in 2014, making it the UK's top tax generator. CRITICAL ASKS Speakers on a panel of insurance and bank chiefs said the two-year period for EU divorce talks would not be long enough to also agree Britain's new trading relationship with the bloc, and called for an interim arrangement to ensure stability. "We need a long transitional period," Adrian Montague, chairman of insurer Aviva, said. That would lift uncertainty and ease the pressure on banks and others to shift operations to the continent before the UK's final trading terms are known, speakers said. "If there is going to be a long period of uncertainty, unfortunately what will happen is people will execute their contingency plans quite quickly, during the course of, probably, the first half of 2017," John Nelson, chairman of Lloyd's of London insurance market said. The financial sector overall had campaigned to stay in the EU, but speakers urged the industry to accept the referendum result and move on to shaping future relations with Europe. Michael Kent, a regulation lawyer advising banks on Brexit at Linklaters, said the sector needed to identify a "small number of critical asks" from the government in its trade talks with the EU. "The City of London can, should and will work with the government to keep the UK prosperous," Charles Bowman, a senior representative of the capital's "Square Mile" financial district told the conference. "Europe needs the UK just as the UK needs Europe." Bowman set out key government negotiating priorities that would make a good EU trade deal for the sector - UK trade arrangements should be maintained "as close as possible" to the EU single market, ideally including passporting rights and keeping the clearing of euro-denominated securities in London. "Financial stability relies on Brexit being stable and orderly with a clear view of what the UK-EU relationship looks like now and in the future," Bowman said. Banks will have to start moving staff if Britain loses access to the European single market, Rob Rooney, CEO of Morgan Stanley international said. The finance ministry has been the main focus of bank lobbying over Brexit but firms in the sector worry it may be outgunned by other government departments less sympathetic to the banks. Shriti Vadera, chairman of Santander UK bank, who heads an advisory committee of banking, insurance and asset management chiefs, said: "Of course there is a lot of emotion around issues of access, and you are being pitted against political priorities, which are not illegitimate, they are legitimate, people voted on them. "We have to accept and be humble in the face of that." (Additional reporting by Anjuli Davies and Andrew MacAskill; Editing by Ralph Boulton)