City must be “alive” to Brexit-induced split between domestic and international businesses after mutual recognition dropped: City of London | City A.M.
The City of London Corporation has suggested Brexit may drive a wedge between domestic financial firms and international ones.
Catherine McGuiness, policy chair, this morning hinted at as split as she warned that the financial sector should expect “turbulence over the next few months, and a greater variety of views from the sector than we have seen so far”.
In a statement to the Court of Common Council, given at the Guildhall in the heart of the City, McGuinness added: “There may also be points at which our fundamental interest, the prosperity and wellbeing of the City of London and all that it contributes to this country, may differ from those of international businesses based here, and we should be alive to that.”
It is thought that concerns are growing that European firms will be able to shrug off the possibility that the City may become a rule-taker under Theresa May’s current proposals. While European firms with a large London presence would still be able to lobby the EU via their domestic governments, UK banks would lose their seat at the table.
McGuinness’ comments come after it was revealed that the government had dropped the City’s preferred model of mutual recognition in favour of “expanded equivalence”. Equivalence has been previously rejected by the City as handing the EU the ability to withdraw access unilaterally and without sufficient notice to provide stability to the financial sector, thus introducing a risk to the entire system.
However the government argues that is not the case.
Existing frameworks for equivalence would need to be expanded “to reflect the fact that equivalence as it exists today is not sufficient in scope for the breadth of the interconnectedness of UK-EU financial services provision”, the white paper said.
Should access be withdrawn for some reason, the white paper says there should be a “structured withdrawal process including a period of consultation”, with clear timelines and notice periods that are “appropriate for the scale of the change before it takes effect”.
But McGuinness repeated her criticism of this approach, saying it would result in less access to each others’ markets. “In our view, that’s likely to mean less business and fewer jobs,” she added.