The UK’s top financial regulator, Andrew Bailey, has said there is nothing stopping Britain and the European Union settling on a mutually beneficial and non-disruptive Brexit agreement for financial services, even though Britain is ultimately set to lose its valuable European financial services passport.
Mr Bailey, speaking at a City of London dinner on Monday, said that “broad mutual recognition” on regulations between the UK and the European Union could replace the single market passport and ensure financial services trade continued in the long term just as it does today.
The chief executive of the Financial Conduct Authority noted that the European Commission has already suggested a similar kind of deep regulatory partnership between the EU and the UK on fisheries after Brexit.
Echoing the Jimmy Cliff song, Mr Bailey said: “You can get it if you really want”.
“If it is possible to envisage a partnership agreement on fishing based on convergence of regimes, of course it is possible to have open financial markets and mutual recognition of regulatory regimes,”
However, it is far from clear whether the EU feels the same way as Mr Bailey abour the merits of mutual recognition.
Last November the EU’s chief Brexit negotiator, Michael Barnier, pointedly declared that “on financial services, UK voices suggest that Brexit does not mean Brexit. Brexit means Brexit, everywhere.”
Cities such as Frankfurt and Paris are also keen to poach high-paying financial sector jobs from the City of London.
Mr Bailey, stressed, as he has done previously, that a mutual recognition agreement was just as much in the economic interests of the EU as it was in the UK, where financial services account for around 7 per cent of GDP and support up to one million jobs.
“The big point here is that if as a response to Brexit the European Union wishes to change the status quo, it would amount to a decision to close market access, not a decision about whether to open it,” he said.
“It would also be a decision to disconnect the EU from the benefits of global markets...In my view this would have serious adverse consequences, and by no means just for the UK.”
At the moment the single market’s financial passport enables UK-based financial firms to sell services across the EU.
International banks have warned that they are already moving resources out of London in response to the impending loss of the passport, though it is currently expected to remain for the duration of the two year transition Brexit period after March 2019.
A report for TheCityUK lobby group last year, compiled by the consultancy Oliver Wyman, said the loss of the financial services passport and zero regulatory mutual recognition after Brexit, could lead to UK finance firms shedding 35,000 finance jobs.
UK ministers claim protecting the UK financial services sector is a priority for them in the coming Brexit trade talks.
Speaking at the World Economic Forum in Davos last month the Chancellor, Philip Hammond, said the UK would refuse to sign a Brexit deal with the European Union unless financial services are included in it.
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