A claim from the UK’s City minister that the EU is softening its opposition to giving the country’s financial services sector a special Brexit deal has been dismissed in Brussels.
John Glen, a minister in the Treasury, suggested on Monday that the EU had shown a new willingness in recent months to offer a deal to protect the Square Mile when the UK withdraws from the bloc.
Hammond: Brexit transition deal has averted City job losses
Glen added that the transition deal agreed by Britain and the EU last month would allow financial firms to move forward and plan for their future with confidence. He insisted that the UK’s high regulatory standards would remain and allow a close relationship between regulators on either side of the English Channel to prosper.
“We do not intend to rip up the rulebook after Brexit,” Glen told a conference in the Guildhall, in the heart of London’s financial district. “The fog is clearing … We are already seeing progress. The EU have now recognised that there will be some form of market access in financial services having previously dismissed the idea.”
However, EU officials in Brussels said the UK appeared unwilling to accept the reality of their position. The EU has already dismissed the UK government’s proposals of mutual recognition of each other’s regulations in the financial services sector.
The EU’s guidelines on its vision of a future trade deal published last month makes no reference to the financial services sector.
Plans for the sector are only cursorily mentioned in an internal annex to the document that suggests the 27 EU member states could unilaterally improve the equivalence regime it offers non-EU countries. “That’s an internal matter, and ambiguous as well,” one diplomat involved in drafting the paper said.
An equivalence regime is a one-sided system whereby the bloc grants market access if a foreign country’s rules are fully aligned with its own. Such access can also be terminated by Brussels at short notice.
The EU is looking at expanding the number of areas where an equivalence decision could give firms located outside the bloc the ability to operate on the continent. However, the outcome is set to fall short of the status quo and offer none of the security against a policy change in Brussels.
Catherine McGuinness, policy chief for the City of London, the municipal body representing the capital’s financial district, warned that the suggestion of mutual recognition of regulations was the “only game in town”.
A second diplomat in Brussels involved in the Brexit negotiations told the Guardian: “Everyone knows that that the City of London is going to relocate to New York.” However, the UK chancellor, Philip Hammond, gave a bullish assessment of the City’s prospects last week, saying a damaging haemorrhage of finance jobs had been halted by the transition agreement.
Mujtaba Rahman, a former Treasury and European Commission official, and now head of Europe for the Eurasia Group risk consultancy, said the City minister was wrong.
Rahman said: “Of course there will be access for the UK financial services sector to the EU’s single market after Brexit but it certainly won’t be preferential and it will be significantly inferior to the status quo.
“Glen’s notion that the EU is softening is simply wrong: the EU can’t give the UK a ‘sweetheart’ deal in services while allowing it to control free movement of labour, as many other EU countries will then line up to demand the same thing.”