City of London Corporation boss Catherine McGuinness has hit out at Boris Johnson’s government for taking financial services for granted and overlooking the City of London during the last two years of Brexit talks.
McGuinness, who is policy chair at the powerful local authority, told City A.M. today that she wanted to see “those important [financial services] sectors…get more of the focus as we go forward”.
McGuinness said London’s finance firms we’re deeply concerned that financial services, which makes up around 7 per cent of UK GDP, were overshadowed by fishing during negotiations, which makes up around 0.1 per cent of UK GDP.
The UK’s financial services sector has lost its pre-Brexit level of access to EU markets and its passporting rights.
“Particularly in the last few months we’ve had this sense that fish and other parts of the economy that are really tiny in comparison have captured much more of the imagination than this really major part of the economy,” McGuinness said.
“There may have been an assumption that the big firms could look after themselves.
“Yes they can, but it means moving some of their business so it’s not necessarily a good thing from our perspective.”
Johnson’s Brexit trade deal does not include an EU-wide arrangement for financial services, with UK firms instead having to negotiate a patchwork of individual EU nations’ regulations.
This has forced major UK-based banks to move more than £1 trillion of assets and thousands of jobs to EU financial capitals to avoid disruption.
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.
Treasury minister John Glen is set to lead talks with the EU this week to strike a “memorandum of understanding” by March that will guide future regulatory cooperation on financial services, however equivalence is not expected to be on the table.
Chancellor Rishi Sunak told City A.M.’s City View podcast yesterday that the City of London was set for a post-Brexit “Big Bang 2.0” that would mirror the 1980s’ period of growth for the UK financial sector.
“If you look at the history of the City stretching even further back than that, it has always constantly innovated, adapted and evolved to changing circumstances and thrived and prospered as a result. And I think it will continue to do that,” he said.
McGuinness was less convinced of Sunak’s assertion, but added that the City would be able to survive and adapt even if equivalence is not granted by the EU.
“It’s hard to see how we would have as significant change as we had with Big Bang frankly, because that was a massive change,” she said.
“Nobody is calling for a major bonfire of the regulations or major restructure of what we’ve got.
McGuinness added: “We’ve got to take our destiny into our own hands, we’ve got to look at the best way forward to the future and what I’d say to the rest of the world is don’t underestimate the UK.”
The UK decided in November to allow the EU to largely maintain its access to UK financial markets, however Brussels did not complete its equivalence assessments before the Brexit transition period ended on 31 December.
Brussels did grant equivalence for UK clearing houses to continue operating temporarily, which was considered necessary to protect financial stability.
The City of London exported £25bn of services to the EU in 2019, which is almost half the total amount of financial services exported by the UK that year.