The EU will grant the City of London access to its capital markets and agree a post-Brexit deal on financial services because it “needs London”, PwC has predicted.
The financial services sector was left out of the post-Brexit trade deal agreed between the two sides last year, but the Big Four firm is predicting the EU will come to its senses about London’s dominance and attractiveness eventually.
John Garvey, global head of financial services at PwC, told the Telegraph that although doesn’t expect a deal imminently, there will come a point when Brussels realises a deal is in its own interests.
“There’s going to be a strange relationship developing over time where the Europeans realise they need London,” he said. “So, I think there will be some kind of deal because the continent will need access to the London market.”
Since Brexit came into force, UK financial services firms have lost passporting rights, which let them operate within the bloc the same as they would in London.
And, although a Memorandum of Understanding on a financial services deal was agree in March, it stops short offering UK firms full market access to the EU so long as UK regulations stay roughly in-line with those from Brussels, known as equivalence.
Last week the EU indicated it was in “no rush” to grant the City of London renewed access to its financial markets post-Brexit, Mairead McGuinness said.
McGuinness, the European Commissioner for financial services, said Brussels will “not be recreating access to the single market for the UK as they have chosen to move out”.
“I know there probably is an appetite on the UK side for us to sit down and get going,” she said. “We are certainly very keen to do that, but we’re not under pressure to do it.”
Last week KPMG’s head of financial services told City A.M. that the City would shake off any consequences of losing equivalence.
Karim Haji said an equivalence deal between the UK and EU would “make life easier”, but argued it was not mandatory for a successful FS sector.
“It’s not that if we don’t have [an equivalence deal] things will suddenly stop working or become very difficult,” he said. “I don’t believe that at all, and actually most of the clients I talk to definitely recognise that.”