Brexit Exiles UK Financial Sector ‘Out in the Cold’ of EU
(08 January 2021 – United Kingdom) The European Union (EU) is struggling with its deliberations on granting Britain access to the bloc’s financial market, despite London and Brussels agreeing on an eleventh hour trade deal.
While the landmark trade deal enshrines rules for industries such as fishing and agriculture, it did not encompass Britain’s significantly larger and influential finance sector. The trade deal was anticipated to pave the way for more access to the EU for Britain’s finance industry however the EU indicated it was in no rush to grant it. Brussels has only granted ‘equivalence’ (financial market access) for two financial activities after Britain left the EU’s single market.
The trade deal refers to financial services in the same way as the bloc’s other trade agreements. Both sides will discuss how they can move forward on equivalence, stopping short of any commitment to grant access, Britain said. The two sides will also aim to agree by the end of Q1 2021 a memorandum of understanding (MOU) on regulatory cooperation in financial services. Countries such as Canada and the United States already have such cooperation.
The Bank of England (BoE) has affirmed there could be disruption in markets if no further access is allowed. Immediately after the United Kingdom (UK) and the EU ratified their trade agreement, the bloc’s executive said it wanted a “series of further clarifications” on how Britain will diverge from EU rules.
“For these reasons, the Commission cannot finalise its assessment of the UK’s equivalence in the 28 areas under discussion and thus will not take decisions at this point in time. The assessments will therefore continue” the European Commission (EC) official said.
“There’s some good language about equivalence for financial services, perhaps not as much as we would have liked, but it is nonetheless going to enable our dynamic City of London get on an prosper, as never before” commented British Prime Minister Boris Johnson.
“We hope it (the trade deal) can lay the foundations for a collaborative future partnership as independent partners” said Chair of the Policy & Resources Committee at the City of London Corporation, Catherine McGuinness.
“Before Brexit, the UK was concentrating much of the EU capital markets, to an extent, one could argue the EU had a capital markets union in the UK under national supervision. In that sense, Brexit has a fragmenting effect not just between the UK and EU, but also within the EU 27. More discrepancies and coordination issues around capital markets are also likely to arise due to regulatory divergences between member states” said co-founder at Brussels-based think tank Bruegel and senior fellow at the Peterson Institute for International Economics, Nicolas Véron.