Wednesday 9 December 2020 6:11 am

Brexit: City of London lobby slams EU for damaging confidence in UK financial services sector

The City of London’s most influential lobby group has hit out at the EU for politicising decisions on the UK’s financial services sector’s access to Europe post-Brexit.

The CityUK chief executive Miles Celic told a Westminster committee today that Brussels has created uncertainty for Square Mile firms through the “regrettable politiicsation” of the equivalence assessment process.

City A.M. reported last month that the UK’s financial services sector would lose its current EU access on 1 January, with Brussels not planning on granting the sector equivalence status any time soon.

Equivalence would allow the financial services sector to have unfettered access to Europe post-Brexit and is only given if the EU deems that the UK’s regulations are comparable to the bloc’s.

City of London firms will instead have to rely on a patchwork of individual EU country regulations that will make it very difficult for firms that have not set up European bases.

Rishi Sunak unilaterally granted equivalence to EU firms last month.

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The CityUK expects Brexit to lead to a loss of 40 per cent of the 20 per cent of UK finance that is for EU customers.

Celic told parliament’s Business, Energy and Industrial Strategy Select Committee that Brussels had unnecessarily damaged the UK’s financial services sector.

“We’ve seen a regrettable politicisation of what ought to be technical decisions on the European side,” he said.

The equivalence process has unfortunately become politicised and companies will look at this, consider there is uncertainty, consider there is a cost and, particularly with some foreign companies, they may decide for now that the United States or Asia is a better bet, certainly in the short or medium term.”

The equivalence non-decision will be a blow for the Square Mile, which wanted a fresh EU-wide deal since the UK exports around £26bn of financial services to the EU annually.

However, the majority of major financial firms have prepared for a worst case scenario and have moved jobs and assets over to the EU.

EY estimates that 10,000 jobs and £1.2 trillion of assets have moved to the EU since the 2016 Brexit referendum.

“The industry has been preparing for this moment pretty much since the day of the vote back in June 2016,” Celic said.

“The nature of what we do, the risk of disruption, the highly regulated nature of the industry means that teams were put together very quickly to plan for any eventuality on the Brexit talks.”

The European Commission was contacted for comment.