City leaders warn fishing tensions with EU are undermining financial services talks

Leading City figures today warned MPs on the cross-party UK Trade and Business Commission that lack of trust between the EU and UK is undermining the chances of securing better market access for the UK financial services sector.

The cross-party Commission, launched last month by pro-internationalist campaign group Best for Britain, held its third evidence session today looking at the impact of the UK-EU trade deal on the financial services sector. The commission heard how international tensions with the EU over issues such as fishing and the Northern Ireland Protocol are impacting on the banking and finance industry. It comes following reports that France is holding up an EU-UK financial services deal due to ongoing disputes over fisheries.

Nick Collier, Managing Director of the City of London Corporation in Brussels, said it was “too late for a fish for finance deal.” He said EU officials regularly raised concerns about the “rule of law, international law, Northern Ireland and fishing,” adding that “levels of trust are low” and that it could take ten years for the UK to rebuild its relationship with the EU following the “traumatic divorce” of Brexit.  

Emma Reynolds, Managing Director of Public Affairs, Policy and Research at TheCityUK, emphasised that “we are not operating in a vacuum” and that EU officials have raised concerns over issues such as the Northern Ireland Protocol and fishing, adding that “none of this is helpful to the relationship.” She added that while the risks of an acrimonious no deal had faded, the UK now faced the risk of ending up in an “acrimonious deal situation” which is in “nobody’s interests”.  Meanwhile, William Wright, Founder and Managing Director of New Financial LLP, remarked that the EU was highly unlikely to grant the UK market access for financial services through its so-called equivalence process, adding that “equivalence is another word for trust. Right now that trust doesn’t exist.”

The session also heard how the lack of a more substantial financial services deal with the EU was leading to assets and jobs moving abroad and a decline in UK tax revenue. William Wright of New Financial LLP said "there are jobs in Bournemouth, Manchester, Glasgow, Belfast that could find themselves at risk of being moved to Estonia, Poland, Lisbon ... because firms have to rethink their whole business model as a result of Brexit". He added that about 10% of assets in the UK banking system have moved abroad, which could result in a hit to the public finances equivalent to around 1% of total tax receipts. 

Nick Collier from the City of London said that: "The German speaking salesperson for a big investment bank... who was based in London will now be based probably in Frankfurt because that's a regulated activity." Emma Reynolds from TheCityUK added that: “We used to export a high proportion of financial services exports to the EU. That has certainly decreased and will continue to, because of these new rules and regulations.”

Commenting following today’s session, Peter Norris, co-convenor of the UK Trade and Business Commission and chair of Virgin Group, said:

“We’ve heard how the UK will likely remain a leading global financial centre, but the government must not take this position for granted.

“The current lack of access to EU markets for UK-based financial services firms is already impacting on jobs and exports, including in regions outside of London. This risks causing a potentially significant hit to tax revenue.

“The government should focus on reducing tensions and rebuilding trust with the EU, to create the political goodwill needed to improve current arrangements for financial services trade. This will benefit both our world-leading finance sector and businesses and customers on both sides of the channel.”

ENDS

Notes to Editor

If you would like to request an interview with one of the UK Trade and Business Commissioners, please contact Paul Haydon on 07988395025, paul.haydon@bestforbritain.org  

Today’s evidence session can be watched again here. A full transcript will be published in due course.

The UK Trade and Business Commission brings together eleven MPs from nine different parties and all four nations of the UK, along with business leaders and experts. It is co-convened by Hilary Benn MP and the Chairman of Virgin Group Peter Norris and the secretariat is provided by the cross-party group Best for Britain.

The Commission is taking written and holding regular oral evidence sessions with expert witnesses, businesses and the public, hearing from a range of voices representing the different sectors of the UK economy. This evidence will be used to make regular recommendations to the Government outlining how the UK's trade performance can be improved, both through new and amended trade deals.