Two years on the EU and the UK need to find a way to work together on finance
It has been almost two years since the UK left the European Union. In that time, political relations across the Channel have been turbulent, to put it mildly. As with any divorce, we have all been taking time to adjust to the new relationship.
Over this period it has also become clearer than ever that the UK and the EU have shared issues affecting households and businesses on both sides, which we need to work together to address. The Covid-19 pandemic, climate change, and the increasing digitalisation of the global economy have brought into sharp relief how no single country – or trading bloc – can tackle cross-border challenges effectively on its own.
In a visit to Paris last week, I stressed this message to our neighbours across the Channel. It is time to move beyond the choppy waters of the past few years and strike a new informal “Entente Cordiale” with our European colleagues.
As France prepares to take over the EU Presidency, there needs to be a close partnership between the City and Europe, particularly when it comes to financial and professional services. The closeness of our existing relationship is underscored by the fact that total trade in goods and services between the UK and France alone was £62bn last year.
This relationship will be different going forward but it can still be close, which is why we hope a Memorandum of Understanding covering the sector will be finalised by the UK and EU at the earliest available opportunity.
In any case we look forward to a continued strong regulatory and supervisory dialogue as our respective regulatory regimes evolve over time, so that we can discuss mutual objectives and avoid unintentional fragmentation.
A key area where we need to cooperate is sustainable finance. With less than one month to go until the COP26 summit in Glasgow, the financial sector is working to support the transition to net zero and ensure it is resilient to the risks of climate change.
The City of London Corporation and Green Finance Institute want to strengthen international collaboration on this urgent challenge, which is why we are hosting a Summit at Cop26 to mobilise private finance. This will focus on the key barriers to accelerating the reallocation of capital, how can finance both transition and growth, and how we price carbon and nature.
In order to succeed, new forms of cross-sector and cross-border collaboration are needed. Agreeing global standards on Environmental, Social and Governance disclosure would be an important step forward to improve transparency and encourage investment in decarbonisation. The removal of barriers to investment and the re-directing of more private capital towards climate change mitigation and resilience will also be crucial.
The work that the EU is doing on its new Strategy for Financing the Transition to a Sustainable Economy, and their leadership on taxonomy is a welcome example in this regard. Given both our commitments to green finance, there is an opportunity to bridge a divide created in the wake of Brexit.
Both the EU and UK can succeed and tackle global challenges with cohesive cooperation on both sides.