Sadiq Khan has called for the government to provide greater clarity for the City of London post-Brexit, with the mayor telling Rishi Sunak to “address the concerns of London’s financial and professional services sector”.
Khan wrote to the chancellor today to call for the government to secure equivalence for the financial services sector, in order for UK banks to regain EU-wide access to its markets, and to make it easier for people to immigrate from Europe to work in the industry.
The UK Treasury is currently holding Memorandum of Understanding talks with the EU over future regulatory cooperation on financial services.
The government does not expect the talks to lead to greater market access, but they instead will likely create channels for the UK and EU to discuss future regulatory decisions.
The only way the Square Mile can regain its pre-Brexit access is if the EU grants the UK regulatory equivalence in about 40 different areas.
This is only granted if Brussels believes the UK’s financial services sector will remain in the regulatory orbit of the EU in each area – now considered an unlikely prospect.
The UK’s major banks were prepared for this outcome and moved more than £1 trillion of assets and thousands of jobs to EU capitals before the Brexit transition period ended on 31 December.
However, Khan said equivalence should still be the UK’s aim and cited research from the Centre for Economics and Business Research (CEBR) that shows the UK could lose £2bn of GDP each year from a smaller financial services sector post-Brexit.
“The government must work with the EU to secure a wider raft of agreements on regulatory equivalence to ensure a fair and level playing field,” Khan said.
He added: “As well as continuing to attract talent from within the UK, it is essential that the government’s immigration policy maintains and broadens the pool of international talent that industry can access.”
Sunak would need to make guarantees to Brussels that he will keep financial services regulation similar to the EU’s to be granted equivalence, however the UK is now heading in the opposite direction.
A review by former European commissioner Lord Jonathan Hill this month recommended a swathe of changes to the UK’s share listing regime as well as a move to allow Special-purpose acquisition company (Spacs) to go public in London.
Hill said the changes would “ensure the UK remains one of the most attractive places to grow and list successful innovative companies”.
Miles Celic, chief of the TheCityUK lobbying group, today told the Financial News: “There is a growing sense that unless we see some progress soon, the UK may need to accept that, despite having identical rules, the EU is unwilling to grant equivalence for political reasons.”
A Treasury spokesperson said: “The chancellor has set out ambitious plans to cement the UK’s position as the world’s leading financial centre – and we’re getting on with them.
“We announced a series of measures at the Budget to boost the competitiveness of the City, including new visa routes to attract the best global talent, reform to our listing rules, and plans to launch the UK’s first ever green bond.
“We’re moving quickly to help UK firms seize opportunities and we’ve already seen results with a large home-grown tech firm choosing to list in London following our Listing Review.”