City of London finance workers have said that the UK’s free trade agreement with the EU was effectively a ‘no-deal’ outcome for financial services due to the lack of market access and certainty it provided for the sector.
Brussels has not given the UK the ‘equivalence’ status which would have allowed British firms to continue operating in European markets as they did previously.
To have done so, it would have had to conclude that the UK’s regulatory framework for financial services was as robust as its own – a decision it has so far refrained from making.
As a result, London has already lost €6bn in euro-denominated trade to EU financial centres including Amsterdam and Paris, according to the FT.
Moving people and funds
Some companies acted ahead of the end of the transition period to reduce operations in the Square Mile.
EY estimates that £1.2 trillion in assets were moved from London and 7,500 jobs have been relocated from the UK to the EU.
No deadline has been given for an equivalence decision to be made, though the UK and EU have said they will continue negotiations.
Bank of England governor Andrew Bailey has warned he would not welcome any deal that made the UK into a ‘rule taker’.
Services and the UK-EU trade deal
It’s not just financial firms that have been affected UK-EU trade deal’s focus being on goods rather than services trade.
According to AccountingWeb, professional services were worth £225bn to the UK economy in 2019, employing 13% of the workforce.
The EU is the largest market for the UK’s professional and business services, amounting to 37% of its exports, valued at £35bn.
The IOE&IT Daily Update here looks at the impact of the deal on the accountancy, legal and IT sectors.
The free trade agreement has done little to alleviate concerns from the accountancy sector that services have been neglected by the government, Institute of Chartered Accountants in England and Wales (ICAEW) chief executive Michael Izza told AccountingWeb.
Although the EU trade deal avoided a disastrous no-deal outcome for goods trade, it “has left unanswered questions around mutual recognition of skills, future regulatory oversight and supply-chain interruptions,” he said.
“We remain concerned that the provisional agreement has little to say about services, which are of such vital importance to the UK economy, and this must be addressed in the near future,” he added.
UK lawyers will retain a presence at the Council of European Bars and Law Societies (CCBE) following the end of the transition period. The CCBE created a new ‘affiliate’ membership for the UK, reports the Law Gazette.
Continued membership of the CCBE is vital to UK lawyers as they seek to facilitate the mutual recognition of UK legal qualifications in the EU.
However, the Law Society has advised members that the new trade deal will affect how they can provide services and how establishments work in the EU area.
“It will have consequences for areas such as intellectual property (IP) law, anti-money laundering (AML) and value added tax (VAT),” it said.
Computer Weekly reports that the UK and EU have reached a data adequacy agreement for the next six months. Failure to reach an interim agreement would have cost the UK economy £1.6bn.
However, Julian David, CEO of TechUK, urged the UK and EU to move quickly to finalise a long-term data adequacy deal protecting integration between UK and EU tech companies, which collectively received a record $41bn in investment last year.
“It is vital that the UK government and European Commission work at speed to finalise the process," he said. This was necessary "in order to give businesses certainty and to allow the UK to move on to a new phase of collaboration with industry and stakeholders in the development of data policies that support high standards and the innovative use of data to improve public services and the growth of the tech sector,” David said.