London banks' Brexit battle heads to Europe

* Lobbying effort shifts to the continent

* Banks have spent months bombarding British govt

* New push will focus on French officials, EU's Barnier

By Andrew MacAskill and Anjuli Davies

LONDON, Jan 10 (Reuters) - Banks with large Londonoperations say they will step up lobbying European officialsbecause they are running out of arguments to convince theBritish government the industry needs single market access afterBritain leaves the European Union.

Banks have focused on pressuring British officials to pushfor as much market access as possible since voters decided sevenmonths ago to leave the EU. They held fewer meetings withEuropean officials, according to several senior sources in thefinancial services industry.

The focus is shifting because after scores of meetings andresearch reports, banks, which say they may begin moving staffand operations out of London in the next few months if there isno clarity, feel they are running out of new points to make.

Prime Minister Theresa May said on Sunday she was notinterested in Britain keeping "bits" of its EU membership,interpreted by some as signalling she will favour immigrationcontrols over access to the single market.

Banks are now planning a new round of lobbying to highlighthow a hard Brexit could harm the EU and the UK. They haveidentified French politicians, EU regulators and governmentofficials, as key groups to win over.

"The battle for Britain is over, the battle for France isabout to begin," said one senior lobbyist.

Another senior lobbyist for one of the major global bankssaid he will spend more time in Brussels this year to target theEU's chief Brexit negotiator Michel Barnier and his teams aswell as Didier Seeuws, a Belgian diplomat, who is helpingcoordinate the Brexit negotiations.

Another lobbyist said he is planning to visit Paris to meetwith French politicians and regulators later this month.

Britain's position as Europe's financial centre is emergingas one of the main collision points in the Brexit talks. SomeEuropean politicians see an opportunity to challenge Britishdominance of finance after decades of viewing its free-wheeling"Anglo-Saxon" model of capitalism with suspicion.

EU leaders like French President Francois Hollande have saidthey plan to weaken Britain's grip on finance by, for instance,demanding the lucrative business of clearing euros should moveto the euro zone.

Finance is Britain's most important industry, accounting forabout a tenth of its economic output and is its biggest sourceof business tax revenue.

EUROPE'S INVESTMENT BANKER

But Britain also acts as "the investment banker for Europe",Bank of England Governor Mark Carney said in November, with morethan half the equity and debt raised for European governmentsand companies done in the UK.

Banks will argue that Europe depends on the strength and thedepth of the financial sector in London to service its economyand companies. If access to the EU is cut off, regionalfinancial stability could be in jeopardy, they will say.

UK-based banks had total outstanding loans of more than 1.1trillion pounds to European companies and governments at thestart of 2016.

The British government has also privately appealed tofinancial organisations to make their case in Europe if theywant a transitional period where their ability to operate in theEU would be phased out gradually over several years.

Finance minister Philip Hammond told a meeting of financeexecutives at the end of November they should lobby Europeangovernments if they want to secure a post-Brexit transitionaldeal, according to two people who were present.

Hammond made the comments at the annual dinner of theAll-Party Parliamentary Group on Wholesale Financial Markets andServices, attended by executives from the major British andinternational banks, according to the people who attended.

"He basically said we need a transitional deal to avoid acliff edge effect, but the EU also needs to argue for it," oneperson at the dinner said. "He was implying that we need to helpthe government prepare the ground."

A Treasury spokesman, when asked for comment, reiteratedHammond's previous statements to lawmakers that Europe will harmitself if they use Brexit to undermine London's position as theregion's principal financial centre.

Bankers say more work is needed on forging a consensusbetween Britain and Europe on what any transitional deal maylook like. European officials say they will not discuss such adeal before Britain triggers Article 50 of the EU's LisbonTreaty to start the process of leaving the EU.

"Everyone has a different definition of what it means inEurope and within Whitehall. We're trying to get a common viewon what transition means," one of the lobbyists said.

THAWING RELATIONS

The British government's relationship with business hasgradually improved after months of friction after the vote.

It hit a low point during the Conservative party conferencein October when May attacked a "rootless" international eliteand officials privately suggested banks would get no specialfavours in the Brexit negotiations.

Nevertheless, banks feel they have largely finished puttingforward their case for single market access.

"We feel we've been lobbying the UK government to death.We've presented every piece of evidence, every report, research,you name it," one of the lobbyists said.

"We've been repeating ourselves for a month or two now...What else do they really need from us now?"

One government official, who asked not to be named, saidregular dialogue with the finance sector will continue, but thenumber of meetings may reduce.

"The door is open if people want to talk to us. There is notan arbitrary point at which speaking to people is no longerhelpful," the person said. "But it has been intense, as wewanted it to be, and that intensity may ease." (Additional reporting by Huw Jones; editing by Anna Willard)