David Davis has committed to protecting talent within financial services after Brexit, as he gives his clearest indication of the government's thinking for the sector yet.
Speaking at UBS this morning, the Brexit secretary set out his vision of the City's future relationship with the EU after March 2019, based on three key planks: protecting financial stability, ensuring consumer protection and supporting the system built since the 2008 crash.
A major component would be protecting the "mobility of workers and professionals across the continent," Davis said. "Whether this means a bank temporarily moving a worker to an office in Germany, or a lawyer visiting a client in Paris, we believe it is in the interests of both sides to see this continue."
An immigration bill, which will be introduced next year, "will set out in more detail what this new system will look like", he added, emphasising that government had been listening to the sector's concerns around talent.
"While this [bill] will mean we’re better able to control the numbers of people coming to the UK — it doesn’t mean pulling up the drawbridge. That clearly wouldn’t be in Britain’s interest."
Davis also hinted that the government was minded to adopt some proposals put forward in the IRSG's recent blueprint for the City after Brexit, citing the report as putting forward "some innovating ideas on possible new frameworks", particularly around exemption regimes and mutual access on the basis of regulatory alignment.
And Davis was unambiguous when it came to clearing, which he said must remain in London. "This is not, a zero sum game," he added, noting fragmentation would ramp up costs for financial services firms and connected businesses across the EU.
But the minister, who last week failed to gain any ground in talks with his countepart Michel Barnier, said it was not just the UK government who must ensure London retains its position.
"For Europe, London is a gateway to global financial markets," he said. "This isn’t just the City of London — it’s the first City of Europe, the primary financial centre for this continent. We want our exit to mark the start of a new partnership with our closest neighbours and trading allies. And together with the European Union — we must work to protect the key European asset that is the City."
Davis added: "Protecting the City — and the contribution it makes to communities and economies right across Europe — is a responsibility not just for the UK but for Europe as a whole."
He also reiterated the Prime Minister's commitment to a transition - or implementation - period, saying it would be "about" two years. This could be agreed "very early next year", he claimed.
City of London Corporation's policy chief Catherine McGuinness, welcomed the sign that government was listening to the sector's concerns around Brexit.
But she said: "We now need to see these words turned into action. Businesses can no longer sit on their hands in the hope that they might get some certainty.
“They need to guarantee their customers that Brexit will not disrupt business – and the lack of progress so far means they are likely to implement contingency plans and move some operations out of the UK.
“The Brexit secretary is right: London is a ‘truly global’ city - a status which has been aided by the growth of the financial services sector. If we don’t start seeing more progress on a transitional arrangement, the future UK/EU trading relationship and EU immigration policies, this title may well diminish.”
Miles Celic, Chief Executive of TheCityUK, agreed. “This speech makes it clear that the government is listening to the industry, understands its value and the need to secure a deal which allows us to ensure continuity of service to customers and clients. Comments about the urgency of getting a status quo transitional period, lasting at least two years, agreed as soon as possible are welcome words. What we need to see now is for them to be translated into concrete action by the UK and the EU27 as soon as possible. If this is not done so soon, more and more firms will accelerate or enact their contingency plans."
He added: "It’s positive to hear recognition of the International Regulatory Strategy’s (IRSG’s) model for a future trading relationship with the EU, in particular around mutual regulatory recognition and cooperation. Further detail on what the UK government is aiming for in this area – what its end game is – would be welcome. We now look forward to seeing its position paper on our industry and services more generally, similar to those already produced for other industries. And the EU27 needs to play its part in creating the conditions to take discussions forward and then responding constructively
Amanda Blanc, chief executive of AXA UK and Ireland, called on the government to look at the insurance industry to provide "the foundations that a post-Brexit UK financial services sector needs to be based upon".
She added: "Promoting our expertise and capabilities alongside a track record in innovation and regulation that no other market can match. That is how we can avoid fragmentation of the EU trading block and provide certainty and stability to the market in the short and medium term.”