The City of London has become the key battleground in Britain’s bid to win an expansive trade deal that covers both goods and financial services.
Services make up just short of 80 percent of the UK’s gross domestic product, and one City of London leader says the idea of the EU making rules for London would be dangerous for the markets here and dangerous for UK taxpayers.
Instead what London needs is local, hands-on regulation by people here who are close to the markets and who understand the markets claims Barney Reynolds.
Mr Reynolds, partner head of Financial Institutions Advisory & Financial Regulatory Group, spoke exclusively to Express.co.uk on why the terms of Britain’s trade deal must include services and and allow the UK to be competitive, and to design a regulatory regime for itself.
Mr Reynolds said: “If the UK is forced to leave the EU without a deal it could be better for the City than if it signs a rule-taking agreement. If the deal is such that we’re effectively governed from Brussels, this is likely to mean we won’t be able to remain competitive and focused longer-term, to the detriment of the global markets operating here.
“It would also be highly dangerous for UK taxpayers.”
There is a growing chorus of support in the City of London for unpacking and furthering the benefits of passporting and equivalence.
The current “passport” allows firms to be regulated in London and to do business across all sectors in the EU without being regulated a second time.
Subsequently, the EU has a way of giving the same level of access as the passport to people who have equivalent regulations. If you come into the EU for business reasons and you have equivalent regulations then you get access across the whole market.
Mr Reynolds says that what the market wants is a mutual access deal that replicates this aspect of the passport.
He said: “Equivalence is ‘passporting PLUS’. It’s better for everyone than passporting. It allows divergent regulations. This is safer for the markets and for taxpayers.
“Will they accept it? David Davis said in the last few days that a deal has to include the financial services.
“Barnier said no. Davis said – yes, we will. We’re going for it.”
Mr Reynolds remains “pretty optimistic” the UK will get a deal but the question is will that be one where they try to make us a rule-taker, especially as there are some heavily protectionist instincts in the Commission.
He said: “The EU wants to exert its authority whilst the UK wants to regain sovereignty – and the City needs the UK to have sovereignty in order to be properly regulated and to remain competitive.”
“The City would love a deal but If the EU isn’t going to play ball we don’t need to talk ourselves into a belief that the whole world’s going to fall apart.
It comes after Chancellor of the Exchequer Philip Hammond and Brexit Secretary David Davis penned a joint article for a German newspaper Die Welt fighting the corner for close cooperation between EU and UK regulators as part of an expansive Brexit trade deal covering both goods and financial services.
Britain’s leaders are working to ensure that “such a catastrophe” as the 2008 crash “doesn’t happen again,” the ministers wrote in a guest column for the Frankfurter Allgemeine Zeitung.
They said: “We must re-double our collective effort to ensure that we do not put that hard-earned financial stability at risk, by getting a deal that supports collaboration within the European banking sector, rather than forcing it to fragment.”