UK hails optimism on Brexit deal for financial services

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A Downing Street source told the BBC that the Government would stand firm on the issue whatever the outcome of the Commons vote, saying: "We will not be staying in the customs union, or joining a customs union". One of May's senior aides told a meeting last month that her team would "not be crying into our beer" if Parliament forces the Government's hand.

Britain's upper house of parliament handed the government its third defeat over Brexit in less than a week on Monday, voting down plans not to retain European Union rights in national law before Britain leaves the bloc.

But a DExEU spokesperson said: "We are disappointed that the House of Lords has voted for this amendment in spite of the assurances we have provided".

The customs union means the EU is a trade bloc with all the countries involved applying the same tariff on goods from outside coming in.

The EU Withdrawal Bill debate will inform the biggest battle over Brexit, expected in October or November, when lawmakers vote on the final deal negotiated with Brussels.

What is the argument for staying in the customs union?

In an exclusive interview with the Express & Star, the Prime Minister said the Government's position on the issue would not change.

Eurosceptic members of the prime minister's ruling Conservative Party were said to be anxious Mrs May would break her promise on leaving the customs union, according to reports on Sunday evening.

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But Lord Keen of Elie, for the Government, said: "When we leave the union, union law will be foreign law".

May has also said that any customs union deal with the EU would keep London from striking new trade deals with fast-growing economies like China and India.

Hard Brexiteers warn that staying in a customs deal with the European Union will prevent the United Kingdom from negotiating future trade deals.

The Government is negotiating what Britain's customs arrangement will be like post-Brexit.

Brexiteers fear the parliamentary arithmetic, combined with Brussels's rejection of Britain's customs proposals and the need to show how a hard border can be avoided, will push the prime minister into seeking some kind of customs union with the EU. They argue this could boost jobs and the economy.

Earlier this year, a leaked government report predicted that leaving the customs union would reduce the growth of the United Kingdom economy by up to 8% over the next 15 years.

"Turkey has a customs union with the EU but isn't in the bloc or the single market", the news website notes.