British financial-services companies will get no special favorsin Brexit negotiations from Prime Minister Theresa May, who wantsto change the relationship between the government and the City ofLondon.

According to three senior figures in May's administration, thegovernment will refuse to prioritize the protection of the sectorafter the U.K. has left the European Union. Her team has alsodismissed the key business demand for an interim deal with the EUto help ease the transition out of the bloc, one of the peoplesaid. All asked not to be named because the information issensitive.

Downgrading the concerns of the City, as the capital's financialdistrict is called, signals a clear break from May's predecessor,David Cameron, who put the risk to financial services at the heartof his failed referendum campaign to keep the U.K in theEU. Cameron argued that Brexit would be a high-stakes “gamble”for the U.K. and its financial-services sector, which accountsfor almost 12% of economic output and 1.1 million jobs.

The shift also risks adding to investor concerns about aso-called hard Brexit. The pound sank to its lowest level sinceJuly on Monday amid growing speculation May's government isprepared to surrender membership of the European single market fortrade in return for more power over immigration, law-making and thebudget.

May's office had no immediate comment on the shift in attitudewhen contacted on Monday.

In her speech on Sunday to the Conservative Party conference inBirmingham, central England, May didn't refer to the City ofLondon, instead saying only that she wants the Brexit deal toinvolve free trade in goods and services as wellas cooperation on law enforcement and counter-terrorismwork.

May told the BBC before her speech that she wants to achieve theright deal for business in her Brexit negotiations. “We owe itto businesses, people who want to invest in the United Kingdom forthe future to actually ensure that we get the right deal fortrading goods and services,” she said.

Shock Realization

Business leaders are failing to recognize that the new primeminister has a different view of the City of London from Cameron,the people said. May does not simply accept what the City says inthe way that Cameron and his former chancellor, George Osborne,tended to do, according to one person. That realization will be ashock to some in the City, the person said.

Financial-services firms risk damaging their relationship withlawmakers by repeatedly complaining about the impact of Brexit ontheir businesses and threatening to move their offices out of theU.K., one senior figure said, dismissing as a joke the idea thatLondon-based financial-service companies would all move toFrankfurt, Paris or Dublin.

While it's possible the government may be bluffing ahead of theBrexit negotiations to come, any attempt to keep the City at armslength risks alienating a core driver of the U.K. economy at a timeof heightened uncertainty. Banks including JPMorgan Chase & Co.and UBS Group AG have warned they will move jobs abroad if theBrexit negotiations threaten to hurt their businesses. That couldundermine the 65 billion pounds ($84 billion) the financialindustry contributes to the nation's coffers each year.

Transitional Period

On Monday, Miles Celic, the chief executive of TheCityUKlobby group, said that “what the industry wants to see agreed andsecured as early as possible is a transitional period to helpensure financial stability, and minimize disruption to businesses'ability to provide products and services to customers.”

Inside the government, officials believe the impact of Brexit onthe City will be to cut the size of a few bankers' bonuses, withonly a few hundred jobs moving elsewhere in Europe. Voters wouldwelcome rather than complain about such an outcome, one of thepeople said.

The 2008 financial crisis tipped the economy into recession,eroding residual public concern over banks and banking jobs. Thesigns of changing attitudes were highlighted in a report in TheTimes of London on Monday that David Davis, the Brexit secretary,seemed unconcerned by the prospect that a hard departure from thebloc could result in the loss of 75,000 jobs from the City.

May announced on Sunday that she would trigger the Brexitprocess by invoking Article 50 of the EU's Lisbon Treaty by the endof March, marking the formal start of a two-year negotiationprocess. Banks and analysts have suggested an interim agreementwith the EU may be necessary to preserve existing passportingrights and give businesses the time to make arrangements to movesome operations to other European cities.

British government officials rejected the idea of seeking aninterim deal in blunt terms.

Steve Baker, a member of May's Conservative Party who serves onParliament's Treasury Committee, said the finance industry mustadjust to the new post-Brexit reality.

“Given the obvious steel in our new prime minister, the Citywould be ill-advised if they did not accept the new politicalreality,” he said in an interview. “For a very long time, theCity is seen as having enjoyed a privileged status and London hasended up becoming a kind of city-state, separate from the rest ofthe nation. Actually we have all got to go forward as one UnitedKingdom — and that is bound to mean change.”

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