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May must protect London's financial centre - MP

LONDON (Reuters) - Britain’s next Prime Minister Theresa May must find ways to protect London’s financial sector as the country negotiates its exit from the European Union, senior lawmaker Stephen Hammond said on Monday.

Britain's Home Secretary Theresa May arrives for a cabinet meeting at Downing Street in central London October 16, 2012. REUTERS/Neil Hall

May is set to succeed David Cameron as leader, taking on the role of negotiating an end to Britain’s EU membership after a June 23 referendum vote to leave the bloc which left doubts over London’s future as a global financial hub.

Hammond, a former banker and a member of the influential Treasury Select Committee which scrutinises the government’s financial policy, said he expected the future of the City of London to be a high priority of his fellow Conservative May.

“One of the things I’m expecting her to do is look at how to make sure that financial services are a key part, staying in London and going forward for this country,” he told Reuters.

He said negotiations before triggering the formal exit process should be allowed to take as long as needed - as much as 18 months - to ensure Britain has a clear Brexit strategy.

The decision to leave the EU has put rival financial centres in Europe on alert, eyeing the possibility of persuading swathes of the banking industry based in London to relocate, or using financial regulation to lever them out.

“I would not be surprised to see us look at regulatory structures,” Hammond said.

“Although one needs equivalence, we can make sure there’s not arbitrage against us and therefore make sure it’s in our favour.”

He also said London needed to make sure it kept pushing itself in speciality markets like infrastructure finance and the insurance sector to keep hold of business.

Markets have reacted poorly to the uncertainty caused by the Brexit procedure and the possibility of a protracted negotiation, but Hammond said there should be no rush to trigger Article 50, the formal legal process for leaving.

May has also said Britain should not rush to trigger the process, but that puts her on a collision course with German Chancellor Angela Merkel, who is often portrayed as the EU’s most influential politician as leader of its strongest economy.

“I would not be surprised to see this running later than a number of people think,” Hammond said.

“I’m hopeful that a number of other European countries will want to have discussions rather than negotiations in the next 18 months, and I think that’s highly likely.”

Asked whether he meant it could be 18 months before Article 50 is triggered, he said: “Yes, I think so.”

Hammond added: “If it is clearly seen that we are making progress to secure a negotiating position, I don’t think it’s in anyone’s interests to have an early trigger of Article 50.”

Reporting by William James; editing by Andrew Roche