By some measures, financial services account for 10 per cent of our GDP and over 10 per cent of our tax take. Our financial services also contribute significantly to the EU; they make up 36 per cent of the EU wholesale market and 61 per cent of the EU’s net exports in financial services.
But since the financial crisis, some EU politicians have publicly blamed Anglo-Saxon capitalism for the consequences of their own profligate government spending. There are now 49 EU regulations and measures coming down the pipeline, many aimed at restricting financial services activity.
With impending banking union, there is a real risk that Eurozone countries will begin to act as a bloc; outvoting the UK on financial issues, particularly in the European Banking Authority, which already gives the Eurozone a majority through qualified majority voting.
We need a robust response. This month’s negotiations over banking union offer a once-in-a lifetime opportunity for the UK to secure protections and advantages for UK financial services. We should be looking for three commitments in return for consenting to European banking union.
First, legal safeguards for the Single Market must be introduced to ensure Eurozone members cannot put up protectionist barriers against British financial products and services.
Second, we must secure an emergency brake for the UK in recognition of the strategic importance of the sector. This should allow Britain to halt damaging financial services directives, referring them to the European Council where there is the possibility of veto. Such an arrangement would, for example, allow us to resist the European Central Bank’s proposal for all clearing houses dealing in “sizeable amounts” of euro-denominated business to be located in the Eurozone.
The third is to secure agreement to expand opportunities for the financial services within the EU and outside. The UK should continue to push for the completion of the single market, especially in services. We should also seek a binding commitment from the European Commission to secure free trade agreements for financial services in developing markets. Far from being shackled in a global market place by EU financial services legislation, we should use the EU to open up markets for European financial services businesses.
There is no doubt about the Prime Minister’s support for the financial services industry. He nailed his colours firmly to the mast in Brussels last December, when he exercised the UK veto. And the government’s resolve is just as strong today. This is great news for the industry and the wider economy and for the country as a whole. And I, one of many, stand ready to back the Prime Minister as he resumes battle in Brussels later this month.
Andrea Leadsom is Conservative MP for South Northamptonshire.