Brexit: Pound surges against dollar after reports Britain and EU agree financial services deal

'Equivalence' agreement would give Britain access to European markets if regulations remain broadly similar

Tom Barnes
Thursday 01 November 2018 09:51 GMT
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The pound surged against the US dollar overnight following reports the government has agreed a deal with Brussels giving UK financial services firms continued access to European markets after Brexit.

British and European negotiators have reached a tentative agreement on all aspects of a future partnership on services, government sources told The Times.

The deal would give UK firms access to European markets as long as regulations remained broadly in line with the EU’s, the newspaper reported.

News of a potential agreement saw sterling rise by as much as 0.8 per cent against the dollar overnight on Thursday to $1.28.

Global banks operating in the UK have had to reorganise their operations around Britain's departure from the European Union, set to take place in March next year.

Many city firms have set up new European hubs and begun to move operations, senior executives and staff to ensure they can continue to serve continental clients if Britain crashes out of the bloc without a deal.

According to The Times' report, Brussels will accept the UK has “equivalent” regulations to the EU, allowing British financial services companies to generally continue business as usual in Europe.

EU officials have said its financial market access system, known as “equivalence,” under which it grants access to foreign banks and insurers with broadly similar home regulations, is likely Britain’s best option.

So far, the equivalence scheme has had limited use because existing rules state market access can be withdrawn unilaterally with only a month’s notice.

However, The Times report claims that under the new deal, equivalence will be extended to encompass part of a wider trade treaty, allowing the EU and the UK to alter financial regulations after first consulting each other.

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Responding to The Times report, the prime minister's spokesman said reports that Britain was close to securing a deal to give it basic access to EU financial markets were speculation, and negotiations were ongoing.

Theresa May's chief Europe adviser, Ollie Robbins, is continuing negotiations in Brussels, amid ongoing speculation about the threat of a no-deal Brexit.

With five months until Britain is due to leave the bloc, business leaders are demanding certainty over the kind of trade terms the divorce will deliver.

UK's Financial Conduct Authority wants Britain to stay closely aligned with the bloc but without having to mirror all of its rules, the body’s acting director, Richard Monks, has said.

The government said there were no set date for negotiations to finish, backtracking on a letter by Brexit minister Dominic Raab that suggested a deal on departure terms would be finalised by 21 November.

He wrote: "I would be happy to give evidence to the committee when a deal is finished and currently expect November 21 to be suitable."

But, after the letter became public, the Department for Exiting the European Union said "there is no set date for the negotiations to conclude" and November 21 "was the date offered by the chair of the select committee for the Secretary of State to give evidence".

Additional reporting by Reuters

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