A group of pro-Brexit figures in the financial district of London (known as the ‘City’) and politicians have created a new UK financial services lobby group in a bid to trumpet the sector’s success post-Brexit.
The recently launched body, is called the CityUnited project and it aims to “combat and negate the European Union’s actions” by “promoting bold new initiatives to exploit the UK’s expertise in financial services”.
The City lobby group is being chaired by ex-chief executive of the London International Financial Futures and Options Exchange professor Daniel Hodson, with former finance minister Lord Norman Lamont and former Member of European Parliament, Lord Daniel Hannan on its board.
It comes as Amsterdam surpassed London as the largest share trading centre in January in the wake of the UK’s exit from the EU’s single market and customs union. The City also lost its previous EU-wide access to European financial markets on 31 December.
“New opportunities are opening up to secure the City’s global leadership in regulation and product development,” Hodson said.
He added: “We see a massive chance to strengthen and enhance the UK’s existing position in global regulatory leadership, working in partnership with other major financial centres across the world, in contrast to the increasingly protectionist financial markets of the EU.”
Brussels believes the UK is destined to diverge from its financial services regulations and has withheld the equivalence status.
The Treasury has been holding Memorandum of Understanding talks with the EU to ensure future regulatory cooperation around financial services. The talks aim to put in place an agreement so that financial services regulators in the UK and EU share information and have open dialogue when making new regulatory decisions.
Foreign minister Dominic Raab said that the City of London’s largest competitors now, post-Brexit, will be in Asia and the US, not the EU.
Barclays chief executive Jes Staley also commented that the City needs “to be focused on New York and Singapore” post-Brexit and not the EU.
“The crucial question for the EU, while it may be able, if you like, to nick a bit of business here or there from the City, but the problem is the measures they will take to achieve this will undermine their own competitiveness”, Raab said.
He added: “The challenge to London as a global financial centre around the world will come from Tokyo, New York and other areas rather than those European hubs. Particularly if they start to erect barriers to trade and investment.”
The post-Brexit trade deal did not include provisions for any kind of services, financial or otherwise. This is despite services making up a massive 80 per cent of the UK’s economy.
This means that the City of London which lost its EU-wide access to European markets, now has to rely on a patchwork of regulations from individual countries.
Major banks had been prepared for this scenario, leading to an estimated £1 trillion in assets and thousands of jobs moving from London to EU financial capitals since the 2016 Brexit referendum.
The only way London’s financial district can regain its pre-Brexit access is if the EU grants the UK regulatory equivalence in about 40 different areas.
This is only granted if Brussels believes the UK’s financial services sector will remain in the regulatory orbit of the EU in each area – now considered an unlikely prospect.
The EU did grant equivalence for London’s clearinghouses to continue operating throughout the bloc on a temporary basis, which was considered crucial to maintaining financial stability.
(The writer is our foreign correspondent based in the UK)