Brexit WARNING: EU strips 5 countries of market access as London prepares for punishment

The European Commission are preparing to remove the rights for Canada, Brazil, Singapore, Argentina and Australia because of claims the countries no longer regulate credit rating agencies as strenuously as Brussels. The Brussels-based executive can withdraw access to its financial markets with as little as 30 days' notice. Britain’s financial services hub fear that they could suffer the same fate after Brexit without a permanent regime being negotiated.

Any future access would be through the EU's so-called "equivalence" system – whereby Brussels deems Britain's rules to be aligned closely enough to its own.

Brexit has already prompted the Commission to toughen up its own equivalence conditions.

Brussels' latest crackdown is the first time such access rights have been withdrawn from a third country partner.

Valdis Dombrovskis, the European commissioner responsible for financial services, told the Financial Times the decision sets "some kind of a precedent for monitoring adherence".

He added: "We had extensive dialogue with those countries, so they knew there was an issue and they knew there may be consequences.

"If they, during several years, chose not to update their legislation, then we had to take the decision to withdraw equivalence."

The bloc has around 40 equivalence provisions through its different financial regulations, which allow traders, brokers and other companies to serve European clients from outside of the EU's financial centres.

The provisions are used by more than 30 countries, and Brussels has declared that Britain will be expected to use them after Brexit.

Equivalence is used by firms in the United States, Singapore and Japan but was not designed for a whole global financial hub on the EU's doorstep.

The EU previously rebuked attempts by former prime minister Theres May to secure a more permanent access deal after the UK's EU divorce.

Mr Dombrovskis has tried to allay fears that the Commission is hell-bent on withdrawing UK access after Brexit, noting the process had taken six years.

"We are doing so after a long process and actually a long negotiation which lasted several years," he said.

Brussels has already said it will grant temporary equivalence for the London Stock Exchange's clearing house LCH until March next year if there is a no-deal Brexit in October.

That has helped the capital retain the bulk of its euro clearing services, which is the market EU politicians said they most wanted to move back to the Continent after Brexit.

The EU is the City of London's biggest customer, with financial services exports worth £26 billion in 2017.

Nicolas Mackel, head of Luxembourg for Finance, has warned a hard Brexit would damage future equivalence prospects by damaging political goodwill in Brussels.

It could even prompt the bloc to review its temporary plans for euro clearing in the event of no deal.