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The EU does not need London’s Financial Sector - Chief Brexit Negotiator

May seeks special deal for City of London

Theresa May addresses cabinet in Mansion House
In her Mansion House speech the UK Prime Minister Theresa May asked for a special deal for London’s Financial sector, however chief Brexit negotiator Michel Barnier has no intention of striking such a deal. Last March Theresa May argued that failing to create a deal for the London’s Financial sector would damage both the UK and EU economies. 

Barnier responded saying that… “some argue that the EU desperately needs the City of London, and that access to financing for EU27 business would be hampered – and economic growth undermined – without giving UK operators the same market access as today…. This is not what we hear from market participants, and it is not the analysis that we have made ourselves.”

Passporting not an option post Brexit

The current passporting system, which allows UK based financial services to operate across the EU will not be possible post Brexit - this was something that May conceded to in her Mansion House speech. However, she is looking for greater assurances for the sector than those offered under the equivalence regime.

Barnier commented on the situation by saying: “I can perfectly see the UK’s logic and interest in pleading for a system of ‘mutual recognition’ and ‘reciprocal regulatory equivalence’. This is, indeed, what the single market achieves…. Why would the equivalence system, which works well for the US industry, not work for the City?” Barnier highlighted the fact that Brussels has plans to build on its current equivalence regime so that it covers more aspects of the financial services sector.

Michel Barnier negotiates Brexit with the UK
Barnier warns UK not to undercut the EU

Barnier asked the British Government not to change its regulatory standard. “The equivalence system will operate in a more effective manner if the UK decides not to diverge from our financial regulation,” he said.

Responding to Barnier’s comments, Stephen Jones, the chief executive of UK Finance, said: “We believe a framework based on regulatory alignment and close supervisory cooperation can be developed to deliver the best outcome for both the EU and UK.”

The two negotiating teams started discussing the future relationship last week. It could be some time yet before they come to a mutual working agreement.

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