oris Johnson was today urged not to leave the City “swinging in the wind” by failing to strike a comprehensive deal with the EU on financial services.
However, hopes in the Square Mile are low that it will deliver any major breakthroughs in imminently pulling down significant barriers to trade with the EU.
Amid the gloom among financial chiefs, Labour’s shadow City minister Pat McFadden told the Standard: “Ministers must not leave the City swinging in the wind.
“The Government has spent three months hosing down expectations about this document as much as possible.
“They have effectively told us not to expect anything in it about equivalence recognition which is very important for UK companies.”
He added: “This whole situation is a reflection of the Government’s deliberate choice to downgrade the importance of the UK’s financial services sector in the Brexit deal negotiations.”
The MoU is expected to establish a forum for UK and EU regulators to hold talks on financial regulation and supervision to establish “a stable and durable” basis to develop co-operation.
A separate process could lead to more “equivalence” recognition allowing British companies better access to EU markets.
The Government has already granted EU firms far more equivalence than vice-versa, though Whitehall sources insists that this was done to benefit the UK financial sector.
Miles Celic, chief executive of TheCityUK, an umbrella group for Square Mile firms, said, “We urge both sides to move quickly and get an agreement in place. The industry is eager to see structured regulatory co-operation on financial services between the UK and the EU, which will be vital to ensuring financial stability, consumer and investor protection as well as building trust and mutual understanding of regulatory reform in each jurisdiction.”
He added: “We believe that securing equivalence determinations from the EU has mutual benefit, especially as economies seek to recover from the pandemic.
“However, 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.
“This will ultimately have a negative impact for customers and clients in both jurisdictions, and is already having the unintended consequence of driving more European financial activity to non-European centres, such as New York.”
Another senior City source said: “It’s [the MoU] a step in the right direction.
“But if it turns out just to be a talking shop then it’s not going to be much use for either side.”
EU financial services commissioner Mairead McGuinness has spoken optimistically in recent days of a deal on the MoU being struck shortly, with some suggestions it could happen as soon as tomorrow.
But she stressed: “We will not be recreating the conditions of the single market for the UK because the UK chose to leave.”
Amsterdam overtook London as Europe’s largest share trading centre in January as the impact of Brexit started to emerge.
Thousands of jobs are also understood to have moved from the City to other European financial centres but the exodus has not been on the scale as first feared.
A Treasury spokesperson said: “The Chancellor has set out ambitious plans to cement the UK’s position as the world’s leading financial centre – making it more open, technologically advanced and a global leader in green finance.
“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 and capital markets 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 as a result of our Listing Review.”