Philip Hammond and David Davis have made a direct plea to European Union member states to agree what they described as "the most ambitious trade deal in the world," in a bid to secure the future of the UK's financial services sector.

In a joint article published on Wednesday (10 January) in the German newspaper Frankfurter Allgemeine, the Chancellor and the Brexit secretary argued Britain should use its "imagination and ingenuity" to craft a "bespoke solution" to maximise economic co-operation with the bloc.

Hammond and Davis, who have travelled to Germany to meet some of the country's business leaders in Munich on Wednesday, added the bespoke deal they were seeking was "the most ambitious in the world" that should "cover the length and breadth of our economies including the service industries and financial services".

The pair have urged the EU to maintain the current approach to banking after Britain leaves the union, to ensure Europe avoids a repetition of the 2008 financial crash, which led to the EU having to rescue Ireland, Portugal and Greece.

"The 2008 global financial crisis proved how fundamental financial services are to the real economy, and how easily contagion can spread from one economy to another without global and regional safeguards in place," they wrote in the German daily.

"That work shouldn't end because the UK is leaving the EU. On the contrary, we must redouble our collective effort to ensure that we do not put that hard-earned financial stability at risk."

Last month, Michel Barnier warned the City of London will not be granted preferential treatment once Britain leaves the EU.

The bloc's chief Brexit negotiator said it was inevitable British banks and financial services firms would lose passporting rights once the UK leaves the single market.

The European banking passport system allows banks and other financial institutions authorised to operate in an EU country, or a member state of the European Economic Area (EEA), to conduct business across the union.

"There is no place [for financial services]," Barnier insisted. "There is not a single trade agreement that is open to financial services. It doesn't exist."

Barnier added the outcome was the result of "the red lines that the British have chosen themselves. In leaving the single market, they lose the financial services passport".

The Gherkin
The City of London is eager to retain its free access to the EU market. iStock

Failure to secure a trade deal including the financial services sector would come as a massive blow for the UK economy and in particular for the City of London, Europe's main financial hub.

A number of major banks have already planned to move part of their European operations to the continent after March 2019, with Dublin, Paris and Frankfurt among the destinations of choice.

Officials from the City of London have repeatedly urged the government to ensure they agree a deal that would see London retain easy access to the EU market, an option Barnier categorically ruled out.

"[Britain's] financial services cannot benefit from a passport in the single market nor from a system of generalised equivalence of standards," he said.

During their charm offensive in Germany, however, Hammond and Davis will hope to convince German business leader that this is not the case. In their article, the pair claimed that Germany is the biggest exporter to Britain among EU countries, accounting for a quarter the bloc's exports to the UK, while trade between Britain and the EU 27 is worth €750bn (£660bn) a year.

"We understand that Germany and other EU countries want to protect the integrity of the single market, and that without all the obligations of EU membership third countries cannot have all the benefits," they wrote.

"Those priorities are not inconsistent with ours — a deep and special partnership with our closest trading partners and allies.

"As two of Europe's biggest economies, it makes no sense to either Germany or Britain to put in place unnecessary barriers to trade in goods and services that would only damage businesses and economic growth on both sides of the Channel."