City of London steps up Brexit diplomacy as financial services white paper is shelved

Catherine Neilan
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City A.M. understands that the Square Mile's diplomatic efforts have been ramped up (Source: Getty)

The City is seeking to take control of its post-Brexit future by ramping up engagement with EU member states, as it emerges that ministers have shelved plans for a financial services white paper.

Meetings have been taking place with weekly envoys from the City of London Corporation and TheCityUK meeting ministers from across the continent.

Previously, discussions had been on relatively informal terms, but City A.M. understands that the Square Mile's diplomatic efforts have been ramped up after British and EU negotiators reached "sufficient" agreement on the first phase of talks in mid-December.

Plans for future trade are now being discussed in far greater detail, with the City-backed International Regulatory Strategy Group's blueprint for financial services – which was published late last year – being used as the basis of the talks.

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The IRSG report, compiled by former minister Mark Hoban and law firm Hogan Lovells, proposes a managed divergence model that its authors believe will maintain the highest possible level of access after Brexit. Although it has been designed for financial services, it can be applied to a large number of professional services and other sectors.

Hoban is travelling around Europe to press the case, visiting Copenhagen today and Brussels next week, before trips to Portugal and Germany in the coming weeks.

“Engagement has stepped up,” he told City A.M. “We want cheerleaders for this [model] but also we need to find ways to reassure those people who are sceptical.”

A senior City source added that the mood on the continent had changed, with France dialling down its attempt to poach London's top financial business – partly in response to concern expressed by other member states, and partly after a realisation that managing sub-sectors such as clearing was not as straightforward as previously thought.

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“Across Europe, people are starting to think more carefully about it,” Hoban said. “The intellectual debate is now in our favour because there is no credible alternative. But ultimately it will come down to whether they put politics or economics first. I hope they would seek to minimise the economic costs ultimately.”

The City has taken its future into its own hands as it emerged the government’s long-awaited financial services paper may never be published.

According to the FT, ministers are thought to have indefinitely postponed plans to publish a paper, despite it being promised since last summer.

The Department for Exiting the EU (DexEU) said it would not rule anything out, saying it was reviewing “what is the best way of advocating our position — be that in private discussions with the EU, speeches or a formal position paper”.

However City of London Corporation’s policy chief Catherine McGuinness slammed the move, saying it had “always been our expectation” that a paper would be published.

“When so many other sectors and issues have been given this clarity, the City is left in the dark,” she added. “This really is disheartening when you consider that financial services alone accounts for over 1.1m jobs and £72bn in tax revenues.”

Conservative MP Nicky Morgan, who chairs the influential Treasury Select Committee, added: “The failure to publish a position paper on financial services sends all the wrong signals... Some level of clarity has been provided for numerous sectors. Financial services firms will be seriously concerned at the chronic state of uncertainty.”

However, Hoban remained upbeat. Responding to the reports, he said: "It’s disappointing the sector has not so far secured a paper on financial services, but we’re confident the government understands the needs of the sector.

"Momentum is building on either side to secure a future framework for an ambitious future trade deal, and that remains our focus."

Read more: The European Union will benefit from a City Brexit deal

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