Post-Brexit talks on City access to EU have stalled, Sunak reveals

In Mansion House debut speech, chancellor sets out series of reforms in bid to help finance industry

Last modified on Thu 1 Jul 2021 13.10 EDT

Talks to secure City of London access to the EU have stalled, Rishi Sunak has confirmed in his first Mansion House speech to financiers, as he set out sweeping reforms designed to help Britain’s finance industry embrace global opportunities after Brexit.

Addressing a hand-picked gathering of 40 young financial workers at a slimmed-down version of what was, in the days before the pandemic, a landmark annual gathering, the chancellor said a deal on a comprehensive post-Brexit financial services settlement with the EU had not happened.

“Now, we are moving forward, continuing to cooperate on questions of global finance, but each as a sovereign jurisdiction with our own priorities,” he said.

Sunak said Britain would diverge from Brussels’ rules on financial services as he set out a vision for the City.

Suggesting the UK would pivot away from Europe, he said he would build instead on deals such as a partnership on financial services signed with Singapore earlier this week – with plans to grow business in the Indo-Pacific, the US and China.

He also issued a message to Beijing, however, that deeper economic ties would not come at the expense of Britain abandoning its principles.

The annual Mansion House dinner, normally a lavish black tie event at which the City’s leading lights mingle with the ministers of the day, was replaced this year with a low-key breakfast livestreamed on the Treasury’s Twitter account. The gathering was Sunak’s first as chancellor, after the cancellation of last year’s dinner.

Speaking from inside the lord mayor’s residence at Mansion House, said Britain now had the “freedom to do things differently and better, and we intend to use it fully”.

While his predecessors would have stood over banqueting tables laden with wine and port in the building’s neoclassical Egyptian Hall, the teetotal chancellor gave his address at a lectern with a glass of water.

He said a more nuanced relationship was needed while attempting to benefit from the nation’s fast-growing financial services market with assets worth more than £40tn.

Former chancellors have used the event to court Chinese business. Sunak sounded a more cautious note, but while dismissing Tory MPs who want to reduce ties with Beijing, he stressed Britain needed a “mature and balanced relationship”.

“That means being eyes wide open about their increasing international influence and continuing to take a principled stand on issues we judge to contravene our values,” he said. “After all, principles only matter if they extend beyond our convenience.”

He also set out a roadmap for financial sector reforms he said would boost Britain’s competitiveness after Brexit, but said the UK would continue to cooperate with Brussels and set high industry standards.

Experts have warned that splitting away from EU rules could make it harder for City firms to do business with continental clients.

It comes amid concerns in government over a gradual leeching away of finance business to EU financial centres such as Paris, Frankfurt and Dublin, after Brexit ended unfettered access to the single market for global banks based in London.

Amsterdam overtook London as Europe’s largest share trading centre earlier this year, in a symbolic blow to Britain’s status as the most important regional hub for international finance.

Government efforts had focused on securing “equivalence” for UK finance industry regulations as part of talks with Brussels, in which the two sides recognise each others’ rules as equivalent to their own.

Centred on access for UK-based clearing houses – financial market infrastructure providers which sit in-between banks’ trading activities – Sunak said there was “no reason of substance” why they should not continue to serve EU clients.

“The EU will never have cause to deny the UK access because of poor regulatory standards,” he said.

It is understood, however, that talks between London and Brussels have stalled, with the chancellor believing the ball is in the European Commission’s court to advance the negotiations, and that the time is right to move forwards with sweeping post-Brexit reforms.

As part of a pledge to maintain the City’s competitive position after leaving the EU, the Treasury launched consultations on reforms to the insurance industry, the regulation of wholesale capital markets and rules for listing companies on the London Stock Exchange. He also promised that tax rates on banking profits should not rise significantly from current levels.

The chancellor also confirmed the government would sell green bonds to British consumers, aiming to make the UK the best place in the world for green finance. The Treasury plans to sell £15bn of government bonds, as well as offer savings bonds to consumers through NS&I.

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