A senior official from the City of London has warned EU leaders to think twice about undermining London’s position as a financial centre, saying a diminished London would hurt Europe too.
Catherine McGuinness, policy chair at the City of London Corporation, which governs the financial district, told Yahoo Finance UK: “I think they need to stop and ask themselves whether they really are going to match London and whether they want us there as a provider of services in the long run or whether they’re happy to undermine us and see the business go to New York or Singapore.”
McGuinness said Brussels should “be careful not to damage the UK because we will be a useful service for the EU as well.”
Her comments come as the UK’s finance industry battles for access to the EU single market post-Brexit. The UK is appealing to the EU for equivalence rulings covering finance, which would allow businesses in London to serve clients across the EU without setting up offices in each member state.
The EU has signalled it is in no rush to grant equivalence and there are fears that officials in Brussels could withhold judgements in a bid to force business out of London and into Europe. The EU last month set out plans to build up its own financial infrastructure.
McGuinness said she could understand why European officials would want to try and win business from London and accepted that there would be some “rebalancing.” But she said a concerted effort to shut London’s service sector out of Europe would leave customers worse off.
“What they’re doing is going to increase the cost,” she said. “Fragmentation increases the costs to the end users or reduces the size of the market. I really would encourage them to think pragmatically about what’s important for their businesses and consumers, particularly businesses that operate cross-borders.”
The UK has already granted 17 equivalence decisions covering EU firms. McGuinness said Brussels should follow suite.
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“We’ve signalled our openness to trade with the equivalence decisions we’ve made, I’d really encourage them to get on and do that,” McGuinness said.
Currently, British rules governing finance are exactly the same as European ones, meaning reciprocal rulings should be straight forward. McGuinness urged the EU to take a “pragmatic” approach.
“With the situation that we’re in, with recovery being a focus for all of us, this is a time when we shouldn’t put up barriers to cross border trade — we all need to be really focusing on that come back,” she said.
EU officials have said they are wary of granting equivalence due to fears of deregulation in Britain. UK chancellor Rishi Sunak has said Britain is heading for a “Big Bang 2.0” — referencing the deregulation and subsequent boom in the UK’s finance industry in the 1980s. Prime minister Boris Johnson has asked business leaders to draw up a list of regulations that might be scrapped to aid the economy now that Britain has left the EU.
McGuinness said there was no great appetite for further deregulation in the City.
“All the way along, consistently, the sector has been clear that it doesn’t want to see a bonfire of regulations,” she said. “Being a well regulated centre is part of the USP of this place and part of what makes it a great global sector. There will be details that some domestic-facing businesses will want adjusted. I think our interest is more in the framework for the future.”
Reviews are already ongoing into areas like its payment systems, UK listing rules, and the fintech sector. Reforms here could help the UK remain competitive internationally in these fast evolving areas. Senior leaders also hope the UK can become a world leader in green finance, an area where bespoke regulation may be favourable.
“We’re forward looking,” McGuinness said. “We’re more concerned with the future framework and what that’s going to look like than we are burning old regulations.
“I’m very confident in London’s long-term future.”
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