Downing Street is still confident it can secure post-Brexit access to EU markets for the City of London as it blames Brussels for missing a key deadline in negotiations.
The UK missed yesterday’s deadline to hand in 28 regulatory equivalency assessments to the EU relating to Britain’s financial services industry.
Brussels must use these documents to assess whether it grants the City of London access to lucrative EU markets after the post-Brexit transition period ends on 31 December.
The EU has the power to unilaterally grant access to financial services firms based on whether UK regulations are similar to their own – known as equivalence.
Valdis Dombrovskis, a European Commission executive vice president, told the Financial Times yesterday that the UK had not given enough information over to make a judgement on whether equivalence could be granted.
The Prime Minister’s official spokesperson today blamed the EU for missing the deadline, saying that Brussels only gave them the 1000 pages of forms on 24 May which was later than expected.
However, the spokesperson added that Downing Street was still upbeat about the prospects of securing equivalency for the UK’s financial services industry.
“As the UK and EU start from a position of having similar financial services regulation this should be a straight forward process,” they said.
“We continue to to have the belief that [regulatory equivalence] is in the best interest of both parties.”
EU chief negotiator Michel Barnier was not as positive yesterday about the future relationship, warning the City that it would have to expect “big changes” next year.
Barnier said the UK was trying to keep too many benefits of EU membership without any of the responsibilites.
He cited the UK’s request to maintain freedom of movement for City professionals as one example.
“It wants to ban residence requirements for senior managers and boards of directors, to ensure that all essential functions remain in London,” he said.
“It wants almost free rein for service suppliers to fly in and out for short-term stays.
“We must look beyond short-term adaptation and fragmentation costs, to our long-term interests.”
The row over financial services comes as a part of a wider range of disagreements in Brexit trade talks.
Negotiations are at a stalemate after months of talks, with little movement on key areas of EU access to UK fishing waters and business competition policy.
City A.M. reported in May that the equivalence assessment for the financial sector could be used as a bargaining chip in talks, with the EU using it as a tool to extract compromises in other areas from the UK.
Much is riding on the City of London retaining access to the EU as almost half of all debt and equity issuance for non-financial Eurozone firms between 2012 and 2018 came from banks based in London.
However, veteran City commentator David Buik said the vast majority of UK companies in the sector were prepared for a no-deal situation.
Many UK financial institutions have set up bases in the EU to ensure they are not completely shut off from mainland Europe if the worst case scenario happens.
“They’ve had four years now to prepare for it and I don’t know of a single financial institution, law firm or chartered accountant who hasn’t made some sort of preparations,” he said.
“We know the business we’re likely to lose in any case, but we also know London stands head and shoulders above the competition in Europe.”