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Canadian companies may be wary of investing in post-Brexit Britain, Morneau says

Finance Minister Bill Morneau is seen in this file photo.

Christopher Katsarov/THE CANADIAN PRESS

Finance Minister Bill Morneau says he's not sure Canadian companies will still want to invest in Britain after the country pulls out of the European Union.

"I don't know," Mr. Morneau said when asked about the issue on Friday during a question-and-answer session at a business gathering in London. He said it will depend on the deal Britain and the EU reach during the upcoming Brexit negotiations, which are expected to last at least two years.

"I suspect it will be sector specific," he added. "And that as businesses consider their options, they will consider the terms of the agreement that the U.K. and the EU have together, and evaluate what that means for their own particular business circumstance." He said that while many business opportunities will likely be equally as good as they are today, "there could be some potential business sectors that feel that that's no longer the perfect business strategy. But I would be guessing."

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Read also: The big issues at play as Britain and the EU negotiate Brexit divorce terms

British Prime Minister Theresa May pulled the trigger on the EU exit mechanism on March 29, launching a two-year divorce process that she hopes will set the terms of Britain's departure and result in a U.K.-EU trade deal. There are about 1,100 Canadian businesses with operations in Britain and many came to the U.K. as a gateway to the EU market.

Mr. Morneau said Canada will be eager to conclude a trade agreement with Britain once it's out of the EU. He added that the Canada-EU trade deal, known as the Comprehensive Economic and Trade Agreement (CETA), could be used as a framework for a Canada-U.K. deal. CETA has been under way for seven years and while it has been signed by both sides, it has yet to be ratified by EU member states.

The Finance Minister also said a Canada-U.K. deal could include financial services, something that is not covered in depth by CETA. Canada wants to be "ready as soon as we can right after [the U.K.-EU talks have ended] to move forward on our mutual process, which would include the financial services sector, certainly, as one of the things that we think of."

Financial services have become a key part of Britain's negotiations with the EU. Roughly one million jobs in Britain depend on the financial sector and many London-based firms are worried about losing so called "passport privileges" once Britain is out of the EU. Those privileges allow firms to register in Britain and offer services across the EU without further registration. Ms. May has highlighted the importance of reaching a deal on financial services as part of the Brexit negotiations. However, several EU leaders see Brexit as a chance to weaken London's dominance and lure some financial firms to other European capitals. Cities such as Paris, Frankfurt and Dublin have been campaigning vigorously for months to encourage London-based firms to move some of their operations.

Earlier on Friday, Bank of England Governor Mark Carney called on Britain and the EU to "take the high road" during negotiations to maintain the free-flow of financial services and avoid undue protectionism. If they do that, he added, the result would be a "template for trade in financial services" that could be used in other trade deals. Whether Canada would be willing to include measures in a trade deal that would open up the country's financial sector to foreign competition remains to be seen and the provisions in CETA do not go anywhere near as far as the EU passport privileges.

Mr. Morneau was also asked several questions about Canada's relations with U.S. President Donald Trump. He said Canadian officials have been making the case for trade in cities and state capitals across the United States and they have met with a positive response. When asked if Canada would pressure Mr. Trump to adhere to the Paris agreement on climate change, Mr. Morneau said Canada would prefer to lead by example. However, he said Mr. Trump's decision to approve the Keystone XL pipeline project "has some benefits environmentally."

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"It takes away the environmental risk of having so much of our natural resources going on trains across our country," he said. And he said the government will try to use that advantage to "encourage our natural resource sector to become more and more environmentally conscious in their practices."

Mr. Morneau was also asked several questions about housing and his upcoming meeting with Toronto Mayor John Tory and Ontario Finance Minister Charles Sousa to discuss the Toronto market. He said that he hopes to meet Mr. Tory and Mr. Sousa soon, and added that the discussion will focus on co-ordinating policy. He also said he would not want to commit to something like a tax on vacant property without more input.

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About the Author
European Correspondent

Paul Waldie has been an award-winning journalist with The Globe and Mail for more than 10 years. He has won three National Newspaper Awards for business coverage and been nominated for a Michener Award for meritorious public service journalism. He has also won a Sports Media Canada award for sports writing and authored a best-selling biography of the McCain family. More

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