Friday 14 May 2021 7:43 am

Downing Street hits out at EU 'threat' to City over financial services deal

Britain has criticised the European Union after reports that France may halt negotiations on financial services following a row about fishing rights.

French President Emmanuel Macron has been looking to pressure Britain into granting European fisherman access to European waters.

Tensions were high a few weeks ago after a dispute over licences led to more than 60 French fishing boats blocking the St Helier port in Jersey.

This prompted Boris Johnson to send two Royal Navy gunboats to patrol the protest, before Macron sent his own naval ships in retaliation.

It comes after France’s European affairs minister Clement Beaune two weeks ago threatened to block any potential move for Brussels to restore the UK’s financial services firms their pre-Brexit access to EU markets – already considered very unlikely.

A spokesman for Boris Johnson said the feud was “another example of the EU issuing threats at any sign of difficulties instead of using the mechanisms of our new treaties to solve problems”.

“We’ve always been clear that an agreement on financial services is in the best interests of both sides,” spokesman Max Blain added.

 Financial services, which are a vital part of the UK economy, were largely excluded from the Brexit deal, leaving many firms unable to operate in the EU.

The UK and EU announced in March that it had drafted a regulatory co-operation agreement, known as a Memorandum of Understanding, on financial services, however it is yet to be signed or made official.

The agreement will outline how financial services regulators in the UK and EU will maintain open lines of communication when making decisions but will stop short of giving City of London firms renewed access to EU markets.

All 27 EU member states have to sign off on the Memorandum of Understanding, with this process reportedly yet to begin.

The only way the City of London can maintain its pre-Brexit access to the EU is if Brussels unilaterally grants regulatory equivalence, however the bloc believes the UK is destined to diverge from its financial services regulations and has withheld the designation.

It has long been expected in the City that the UK would not get equivalence, leading to more than £1tn of assets and thousands of jobs moving from London to European capitals.

Bank of England governor Andrew Bailey said earlier this year that equivalence was the best case scenario for the financial services sector, but that it wouldn’t be worth it if the UK had to be a regulatory rule taker.

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