Boris Johnson’s economic guru has called for EU staff working in London to be given certainty over their position after Brexit.
Prominent City economist and close ally of the Foreign Secretary, Gerard Lyons, said the fate of EU staff is "the real big thing” concerning the financial sector.
His intervention comes after European politicians rejected Theresa May and David Davis’s plans for dealing with EU citizens in the UK after 2019 and amid reports of cabinet splits over the Government’s approach to post-Brexit immigration.
The Tory row has seen Mr Johnson forced to deny that he was about to resign and Theresa May reining in Philip Hammond following reports that the Chancellor signalled freedom of movement could continue in all but name after Brexit.
Speaking on BBC Radio 4’s Today programme, Mr Lyons said the mood in the City of London was good and people expected the financial services sector to remain strong after Brexit despite some banks moving operations.
But he then added: "The big concern at the moment is about timing. We need a temporary transition period.
"And the real big thing concerning the City is about EU staff. One in eight people who work in the City is from another EU country.
"The sooner the Government can clarify the position about EU staff then that will ease many of the worries at the moment.”
The European Parliament has threatened to veto the UK’s proposals for EU citizens in the UK after 2019 unless they are improved, with reports of little progress being made by Brexit Secretary Mr Davis in Brussels talks.
In London, Cabinet divisions over the approach to post-Brexit immigration have also emerged in recent days, after Mr Hammond signalled freedom of movement could continue for a three-year period in all but name after the UK leaves.
Home Secretary Amber Rudd also sought to reassure business there would be no sudden "cliff edge” drop in access to skilled EU workers.
Tensions then heightened after an interview with Brexit-backing International Trade Secretary Liam Fox was published, in which he insisted moves to retain free movement would "not keep faith” with the referendum result and highlighted that the Cabinet had agreed no joint-stance.
There were reports that neither Mr Fox nor Foreign Secretary Mr Johnson were pre-briefed on the comments made by Mr Hammond or Ms Rudd – though Downing St said it did not recognise this version of events – with Mr Johnson forced to deny that he was preparing to resign over the issue.
Downing Street moved to calm the row yesterday in moves that was seen as a slap down to the Chancellor, with the Prime Minister’s spokesman telling reporters: "It would be wrong…to suggest that free movement will continue as it is now.”
On a trip to Brazil on Tuesday, Mr Hammond denied claims that talks on an EU trade deal would be delayed as a result of slow progress in talks so far.
Michel Barnier seeks clarification over key issues in Brexit talks
He said: "As Michel Barnier, the EU negotiator says ... the clock is ticking, we are already in a timescale that has to end on March 29 2019, which is when Britain will leave the European Union.
"There's a discussion going on about how we then move from full membership of the European Union to a future relationship with the European Union and that's a debate, a discussion that will go on through this negotiations.”