The City’s message to Starmer: we move faster without the EU

London’s banks are wary of closer alignment with the European Union, preferring speed and flexibility over uniformity – and with Wall Street looming as a global rival, the City would lose more from EU regulation than it gains, says James Moore

Thanks, but no thanks. That’s the City’s message when it comes to the closer EU ties being pursued by Prime Minister Keir Starmer. It is a message delivered quietly, but with absolute clarity.

He appears to have heard it. Britain’s financial services industry will not be part of any Brexit reset, and the financial centre is more than happy with that state of affairs.

For a start, there are those bankers’ bonuses, capped in the EU but not in the UK. Bankers like the opportunity to get rich quick, and London offers it. Bank bosses also highlight the flexibility they now have to move payrolls up and down as required, by contrast with the EU, where bankers tend to have much larger basic salaries to compensate for the lack of big bonuses.

Interestingly, the UK’s regulators have never been keen on the cap, arguing that the fat basic salaries seen in Europe could compromise banks’ ability to preserve capital in the midst of crises. In other words, restraint can sometimes weaken, rather than strengthen, financial resilience.

But this isn’t just about bonuses. Far from it. What really matters is speed, autonomy and global competitiveness.

“Look at this way. London is a global centre. It doesn’t just trade with and compete with Europe, there’s the US too. If you look at what’s happening over there, there’s a massive deregulatory push by President Trump. The banks have lower capital requirements. They can lend more flexibly,” a banker, whose personal politics are pro-Europe, told me.

“The UK needs to keep up with that, and if we align with the EU on financial services regulation, it is one area where Europe is just too slow. If we align with a more conservative version of regulation that has a slower pace of change compared with the US, we’ll risk losing out.”

That view is widely shared across the Square Mile. It is reflected in the position of TheCityUK, the industry’s main lobby group. Its chief executive, Miles Celic, notes that the EU is only the UK’s second-largest market for financial services. The biggest? That’s the US.

“Closer co-operation (with Europe) makes sense. But rejoining the Single Market or a customs union would not be a simple upgrade. As a non-member, the UK would risk trading flexibility for uniformity: less scope to shape its own rules and fewer chances to cut bespoke deals beyond Europe, in return for the benefits of a single EU framework. As always, there’s a trade-off,” he says.

“For our industry, a customs union would change little for firms themselves, while potentially dulling the UK’s hand in wider trade talks. So, the real question is not just about smoothing trade flows with the EU. It is about how much freedom the UK wants in a sector where it competes globally – whether to accept a narrower but potentially deeper path or keep the ability to move quickly as the terrain shifts.”

In financial services, the latter is clearly the priority. Technology is reshaping the industry at pace. Cryptocurrencies’ next generation, asset-backed stablecoins, are creating as much buzz as the announcement of a Taylor Swift tour. The ability to move fast has never been more important – and this is where Europe struggles. Europe’s sclerotic bureaucracy and regulatory infrastructure are looked upon with horror in large parts of the UK’s financial centre, all the more so given the recent revival in its fortunes.

The 2025 edition of the Global Financial Centres Index had London in second place, with its rating trailing New York by just a single point. It was the sole European entry in the top 10. Frankfurt, the next best, came in at number 12, down one. Paris (18th), Luxembourg (19th) and Dublin (20th) also lost ground when compared with 2024. Only Zurich, up five places to 16th, improved. Asian centres were among the biggest gainers – and thus the biggest competitive threats.

This matters because the City’s confidence was badly shaken by Brexit. During the withdrawal process, Boris Johnson’s administration was sharply criticised for ignoring financial services in its exit talks with the EU. Thousands of jobs were lost in the aftermath, and hopes that the City could secure equivalence from Europe were dashed. In the following years, London lost its position as Europe’s top share-trading venue to Amsterdam, while Paris overtook London’s stock exchange in terms of size. In 2024, however, London took back its throne.

Financial services remain a rare sector where Europe arguably needs London more than London needs Europe. Today, London is far more worried about Wall Street as a competitor than it is about EU ties. That reality underlines Celic’s point: there may be more to lose than to gain from closer alignment when it comes to financial services regulation.

While there are significant disadvantages in joining a customs union – some of Britain’s more excitable politicians really need to learn to do their research – I would still back membership of the Single Market. It would make the UK a rule-taker, like Norway or Switzerland, but the economic benefits would be so powerful UK-wide that it would be worth over-riding the City’s objections.

Keir Starmer, however, appears to have ruled that out, although you can never be absolutely certain with his U-turn-happy crew. It would also require Europe to play ball, and it may not be keen to do that, not least with Nigel Farage leading in the polls. In the absence of that, the priority should be co-operating with the EU in areas other than the City.

Surveys have repeatedly suggested a clear majority of Britons favour closer ties with the EU, up to and including renewed membership. I would back the latter. But I would be genuinely interested in the results of such a poll in the City itself, specifically among its movers and shakers. I’m not so sure they would be keen.