UK-EU stand-off over financial rules parity and future market access for City of London

Wed 1 Jul 2020
Posted by: William Barns-Graham
Trade News

brexit finance

The City of London’s future access to financial markets in Europe has become the latest flare-up in the UK-EU negotiations.

Both sides were due to have completed assessments of each other’s regulatory regimes for financial services by yesterday (30 June), but the deadline has been missed by the EU.

It was expected that the two sides would be found to have “equivalent” financial regulations in place – meaning each side’s laws are equally robust for the sector.

Equivalence would allow the UK to have the same access to EU markets that it has now, and vice versa. Financial services are a cornerstone of the UK economy and the country’s leading service export.

EU: UK proposal unacceptable

Michel Barnier, the EU’s chief negotiator, has described the UK’s proposals so far as “unacceptable”, the FT reports.

The UK is trying to retain freedom of movement rights for financial services professionals and has been accused of trying to restrict the EU’s capacity for regulatory divergence.

He said the UK “wants to ban residence requirements for senior managers and boards of directors, to ensure that all essential functions remain in London.”

“It wants almost free rein for service suppliers to fly in and out for short-term stays,” but he said the UK “cannot keep the benefits of the single market without the obligations”.

Brussels is concerned that the UK is trying to “limit the scope” of a standard provision in trade deals which allows both parties to adopt whatever trade restrictions it needs to protect financial stability.

UK: EU too slow on equivalence

The UK, which says it committed its own assessments on time, is awaiting clarification of the EU’s own position, the Guardian reports.

British officials are reported to feel “frustrated that the questions posed [by the EU] are far broader in range than necessary for an equivalence decision to be reached”.

The British government is said to be concerned that the EU will wait till there is clarity on the broader trade and security negotiations before a decision on equivalence is made.

The Treasury said this “should be a straightforward process”.