UK Financial Services Sector Drops Demand for Post-Brexit Passporting

Britain’s finance industry has reluctantly given up on efforts to keep full access to the European Union after Brexit and is pushing instead for a more limited trade deal that would potentially exclude some financial products.

Banks, insurers and asset managers have concluded there is no realistic chance of maintaining full passporting rights after Brexit that would allow them to sell all their services across the 28-nation bloc from Britain.

TheCityUK, the country’s most powerful financial lobby group, instead called on Thursday for limited market access for some finance sectors based on a pact in which Britain and the EU would accept each other’s rules.

Such an “equivalence” arrangement would keep the door open for cross-border trading of stocks and bonds, and sales of certain other products.

TheCityUK document is the first attempt to condense the industry’s priorities after months of conflicting lobbying and comes just two months before Britain plans EU divorce talks.

“I am confident that this represents in broad shape the key priorities for the industry,” TheCityUK Chief Executive Officer Miles Celic told Reuters.

“There are a multiple number of documents out there of stuff at significant length. So there was a sense among our membership to filter down what the key asks were into a single place.”

The future of London as Europe’s financial center is one of the biggest issues in Brexit talks because it is Britain’s largest export sector and biggest source of corporate tax revenue.

By pushing for an equivalence deal there is a risk that some financial sectors may be excluded from any final settlement. There is currently no equivalence regime for commercial banking or some forms of insurance.

Separately on Thursday, the Financial Services Negotiation Forum of pro and anti-Brexit financiers also said that Britain should seek a “bespoke” form of equivalence to maintain market access.

The current equivalence regime is not a “silver bullet” solution that can replace passporting in its entirety, it said in a report with law firm Norton Rose Fulbright.

Daniel Hodson, chairman of the forum’s executive committee, said the financial sector was now coalescing around equivalence after having had time to consider how it could work.

“There is considerably increased realism now that people have begun to really focus on the issues and get their mind round them,” Hodson said.

Until now, finance organizations have clashed over who should be leading efforts to lobby the government and what their Brexit response should be.

After the June vote, business leaders begged for Britain to stay inside the single market, for example, by having a Norway-style deal that would provide full access to Europe’s markets.

But EU leaders have repeatedly warned that single market access is defined by the bloc’s four freedoms – free movement of goods, capital, services and people – and that they cannot be unpicked.

TheCityUK proposals call for “clear and upfront transitional arrangements” to bridge the gap between leaving the EU and the start of a bespoke deal, though they do not specify a timeframe.

($1 = 0.8248 pounds) (Editing by Jane Merriman/Keith Weir)

[Editor’s Note: The report issued by TheCityUK can be obtained via the association’s website.]

Related:

• Unfettered EU Access Must Be Priority of Brexit Talks: Report