The ongoing row over access to the UK’s fishing grounds saw France and Britain send patrol vessels to the Channel Island of Jersey last week to monitor a protest by French trawlers.
Backing France, the European Commission has said the conditions imposed on licences for French vessels in Jersey waters breach the terms of the Brexit trade deal.
The dispute now threatens a financial services agreement that City of London chiefs are desperate to see struck as soon as possible.
“We’ve made a link between the two,” an unnamed EU official familiar with the move by Emmanuel Macron’s government told Reuters.
The French government spokesman Gabriel Attal did not deny Paris was holding up the deal for the financial sector as a lever in the fishing dispute, saying all post-Brexit issues were related.
Watch: Why is fishing so important in Brexit talks?
Another EU official said frustration with the UK was not limited to France. “It’s not just France and it’s not just fishing,” said the diplomat. “Britain must fully apply the agreements it signed up to, which is not the case right now.”
Britain’s huge financial services sector was largely cut off from the EU when the UK formally quit the bloc and the transition period ended at the start of 2021.
The Brexit trade deal does not cover financial services and direct access to the single European market for financial firms in the City of London has yet to be decided by the bloc under a process known as “equivalence”.
Britain and the EU have agreed in principle on a memorandum of understanding on co-operation between financial regulators, but it has yet to be formally ratified by the bloc’s 27 member countries, including France.
“We will resume our equivalence assessments once the regulatory cooperation framework is in place and do so on a case-by-case basis, taking into account the UK’s regulatory intention,” the EU’s financial services chief Mairead McGuinness said on Tuesday.
However, some banking leaders in Britain are said to be pessimistic that the EU will grant meaningful access to the single market anytime soon.
Meanwhile, French fishermen continue to claim that the British dependency of Jersey imposed unfair restrictions on the waters they could fish in when it issued licenses in late April.
Jersey has since proposed delaying new post-Brexit restrictions on French fishermen until the end of July, French minister for marine affairs Annick Girardin told parliament on Tuesday. “New proposal by Jersey: We’re not there yet,” she later tweeted.
Cabinet Office minister Michael Gove said earlier this week that UK officials – including the environment secretary and Brexit minister were currently trying to resolve the matter with their French counterparts.
“I know George Eustice and Lord Frost have been having conversations with French and EU counterparts to deescalate the situation,” he said.
Watch: 10 ways to Brexit proof your finances