Momentum is gathering behind mutual recognition and a free trade agreement (FTA) as the basis for the City after Brexit, with a second report arguing it is the best possible route.
The blueprint, written by UK Finance with support from law firms Clifford Chance and Global Counsel, argues for a "bold and ambitious" FTA for financial services after leaving the European Union, which will be based on mutual recognition. Our "unparalleled" position of convergence offers the UK and EU an opportunity to create "a robust and flexible market access model", it claims.
The report, which has been many months in the making, is seen internally as "complementary" to the one former City minister Mark Hoban co-authored with Hogan Lovells for the International Regulatory Strategy Group two months ago. The IRSG's blueprint, which also argued for mutual recognition, supervisory co-ordination and a free trade deal for the sector.
However this report goes deeper into the banking sector to consider the different levels of sophistication and consequent regulation required.
It also argues for free movement of labour to continue within the sector after Brexit - something which David Davis revealed was his ambition only this week.
City A.M. understands the UK Finance's vision is likely to contribute to a forthcoming government white paper on the financial services sector, having been broadly welcomed by officials during draft stages. It has also received a warm reception from German officials, although it cannot be formally approved of until the second phase of talks begins, in which trade and transition can be discussed.
Having been presented to "private audiences" on both sides of negotiations, UK Finance is now hoping the report will encourage a public debate about the next stage.
UK Finance chief executive Stephen Jones told City A.M. it was time for "both sides to get around the table and start thrashing out the detail" of a deal, warning of "substantial" disruption to markets, increased costs and damage to the UK unless talks quickly progress to phase two.
The report was "an ambitious, credible and positive model which EU and UK policymakers can utilise to enable future trade in services between the EU and the UK" when that happened.
Jones added: “On exiting the European Union, it’s entirely possible to use the tools and trust we have established during 40 years of membership to construct a new FTA that preserves some of the benefits of close alignment without sacrificing political and regulatory autonomy.
“Traditionally services were not covered in great detail within FTAs but there is every reason why, in an increasingly service-based global economy, an EU-UK FTA should include an ambitious and credible model for cross-border trade in financial services.”