Ministers are racing to settle the City's relationship with the EU with regards to selling financial services
The City’s trading relationship with the European Union will be subject to crunch talks this week as ministers race to secure a deal within two months. The UK is hurrying to nail down a plan for selling financial services across Europe after the Brexit trade deal failed to cover swathes of the banking and insurance sectors. Treasury ministers and civil servants are poised to meet with City lobby groups in days to map out a “memorandum of understanding” with the EU, the Mail on Sunday reported. The talks will be spearheaded by City Minister John Glen and Katharine Braddick, the Treasury’s director general of financial services, in the hope of agreeing on a deal by March. UK financial services exports are worth £56bn, with EU exports accounting for around 34pc, according to industry body TheCityUK.
Banks have been shifting billions of pounds in assets out of the UK as Brexit brings an end to passporting rights, the agreements which hand full access to European markets. Such disruption could be eased if the EU offered market access through ‘equivalence’, a system that outlines one set of rules for trade. However, Brussels fears the UK may shift further away from the EU by rolling back regulation in an attempt to become more competitive. Mr. Glen has moved to assuage concerns, claiming London did not have its sights on becoming “Singapore-on-Thames” by axing regulation. The capital’s financial services were not going to be “enhanced” by “rapid deregulation or reckless short-termism, he told The Sunday Times. “Where we have the opportunity to do things differently in future — and it makes sense for the UK — we’ll be ready and willing to do so,” he added. “But we take the responsibility of working in an operating environment that needs to be reliable and of high quality, in a global context, very seriously. “What we want is a model of structure and co-operation with the EU that allows us to maintain that stability and mutual market access.” The memorandum of understanding will not be legally binding, according to reports, but will lay the groundwork for market access and future deals. Such an agreement could hand business more confidence to trade across the bloc by extending a 30-day notice period in which the EU could stop City firms from operating. Bank of England governor Andrew Bailey and Sir John Cunliffe, the deputy governor for financial stability, are also planning to discuss trading plans with City bodies. It comes amid scepticism that the UK can reach an agreement with Brussels on such a timeframe. American law firm Baker McKenzie warned last month that a deal could take longer because the EU’s assessment on equivalence with the UK may stretch deep into this year. Mark Simpson, a partner in its financial services arm, said in December that equivalence was “not as straightforward as either the EU or UK might otherwise indicate”. “The EU has not yet finished its equivalence assessments, and has expressed concern about the UK’s plans for its future regulatory framework and the degree of divergence from the EU regime this might entail,” he added, “It is likely that the commission will continue its assessments well into 2021.”