EU chief negotiator Michel Barnier has confirmed claims that the UK has not completed necessary equivalence assessments by today’s deadline, marking a blow to the UK’s efforts to determine the City’s access to EU markets after Brexit.
Valdis Dombrovskis, a European Commission executive vice-president, yesterday said the UK had so far answered only four of 28 questionnaires sent by Brussels seeking information about British regulation of the financial services industry after the Brexit transition period.
Barnier today confirmed that the UK has not completed its equivalence questionnaires by today’s deadline.
In a statement, the EU chief negotiator said: “As you know, the political declaration committed us to ‘best endeavours’ to finalise our respective assessments by the end of June.”
“The European Commission has therefore sent questionnaires to the UK, covering 28 areas where equivalence assessments are possible. So far, the UK has only answered four of these questionnaires. So we are not there yet.”
The government received 1,000-plus pages of questions in April and May, with the last 248 pages arriving on 25 May.
Both Brussels and London had agreed to complete assessments of the other’s regulatory regimes by today’s deadline, with the hope that they would be deemed “equivalent”, therefore allowing businesses to continue as usual into next year.
However, with the deadline now missed, financial sectors on both sides are likely to be left in the dark about future terms of business.
Earlier this month, the Treasury confirmed it is prioritising equivalence arrangements for financial services to ensure a smooth exit at the end of the transition period.
John Glen, economic secretary to the Treasury, said striking equivalence assessments would be in the UK and EU’s mutual interests. Glen said the Treasury could “see no reason why the UK and EU will not be able to find each other equivalent across all existing equivalence regimes”.
However, Barnier today issued a stiff warning to the Treasury, reminding the UK that equivalence will only be granted if it is in the EU’s interest.
“We must look beyond short-term adaptation and fragmentation costs, to our long-term interests… And so, we will only grant equivalences in those areas where it is clearly in the interest of the EU; of our financial stability; our investors and our consumers.”
He added: “What does this mean in practice? It means that you need to get ready for 1 January 2021!”
The Brexit transition period is due to expire on 31 December 2020, meaning the UK will automatically leave the single market and customs union if a deal has not been decided by that date.
The deadline for deciding whether to extend the Brexit transition period is tomorrow, but Prime Minister Boris Johnson has repeatedly affirmed that the UK will not seek an extension.
Speaking today, Barnier said: “We now know that the transition period will not be extended. The EU was open to an extension. But the UK refused. It is the UK’s choice.”
He added that the UK should brace for “big changes” on 1 January, including the fact that UK firms will lose the benefit of financial services passports.
Barnier added: “This should not come as a surprise to you. We have been warning you about this for the past three years.”