FORMER UK Prime Minister Theresa May has severely criticised Boris Johnson’s Brexit trade deal with the EU for not including provisions on financial services. May said that her failed deal (when she was PM) was ‘a better deal’ than Prime Minister Johnson’s and said she was ‘disappointed’ his trade agreement does not have a wide-ranging services agreement.
The deal, which came into place on January 1, as the UK left the EU’s customs union and single market, does not include an EU-wide arrangement for services, with UK firms instead of having to negotiate a patchwork of individual EU nations’ regulations.
May said that not getting a post-Brexit financial services agreement was a massive blow to the UK economy.
“In 2018, I said that we wanted to work to get financial services deal in the future treaty arrangement and that it would be truly ground-breaking. It would have been, but sadly it has not been achieved,” she said.
She added: “We have a deal in trade which benefits the EU, but not a deal in services that would have benefited the UK. The arrangement treaty is clear that future negotiation on these points is possible and I hope the government will go to the negotiations with alacrity and vigour, particularly on financial services.”
The only way the UK financial services industry can have EU access is if Brussels grants regulatory equivalence. This is a classification that will only be given if Brussels deems that the UK will stay roughly within the EU’s regulatory orbit for financial services.
The post-Brexit trade deal has outlined plans to set up a dialogue between the UK and EU to discuss a potential equivalence deal, with March set as a rough deadline.
A senior member of the UK’s Brexit negotiating team said that progress could be made in this area within the coming few months.
One of the world’s largest law firms has expressed doubt on claims by the UK that it can negotiate a post-Brexit financial services settlement with the EU within the next three months.
US firm Baker McKenzie – the fourth largest law firm in the world by revenue and the top firm for multinational mergers and acquisitions – has said the EU’s equivalence assessments will continue well into next year.
UK financial services will, for now, have to rely on a mixture of regulations from individual member states. Brexit trade deal included plans to arrange formal talks between the UK and EU to discuss a potential equivalence deal, aiming to be decided within three months. Mark Simpson, a partner in Baker McKenzie’s financial services unit, said this timeframe was very unlikely to yield results.
He said: “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. It is likely that the Commission will continue its assessments well into 2021.”
He added: “Equivalence is not as straightforward as either the EU or UK might otherwise indicate, with the EU taking a technical, ‘detailed and granular’ forward-looking approach to equivalence and regulatory divergence, while the UK remains focused on outcomes-based assessments through determinations.
However, the UK’s Brexit negotiating team felt, with some degree of confidence, that progress could quite possibly be made within the time frame.
“The best thing is if we understand each other and understand what underpins equivalence decisions when they’re going to be taken,” they said.
Adding: “We believe it’s a meaningful commitment and we expect it to move forward quite quickly.”
(The writer is our foreign correspondent based in the UK)
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