France is aiming to block a post-Brexit financial services pact between the UK and the EU over a row about fishing rights.
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.
Bloomberg reports that French officials are trying to stall the signing of the Memorandum of Understanding due to the country’s fishermen finding it difficult to get fishing permits for British waters.
The issue blew up last week when more than 60 French fishing boats created a blockade around the island of Jersey, leading Boris Johnson to send two Royal Navy gunboats to patrol the protest.
French president Emmanuel 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.
She said there would be “retaliation measures” taken if the UK does not “deliver licenses [and] authorisation to access their waters for fishing”.
Mairead McGuinness, the European Commissioner for financial services, said last month that Brussels will “not be recreating access to the single market for the UK as they have chosen to move out”.
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 £1trillion 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.
Lord Jonathan Hill recently unveiled a review for the government that called for a change the UK’s share listing regime and for regulators to allow Special Purpose Acquisition Companies (Spacs) to list in London in a bid to maintain the City’s global competitiveness.
Changes like this would not be possible if the UK were to stick to EU rules and try to gain equivalence.