The UK will not water down rules to protect its financial services sector in the wake of Brexit, the chancellor said on Wednesday as he sent a message to his counterparts in the EU that he would not tolerate protectionist measures being imposed to lure business way.
Philip Hammond also told his audience of financiers in a set-piece speech in the City that his priority was to devise policies that would allow the UK to retain its place as a leading global financial centre.
He said the financial sector was the UK’s major export industry with the EU and needed a bespoke deal. “We will seek a new paradigm for our future trading relationship in financial services,” he said.
He added: “We acknowledge that there are legitimate concerns among our EU colleagues about the oversight and supervision of financial markets here in the UK that are providing vital financial services to EU firms and citizens.
“We will address them by making forward-leaning proposals for greater transparency, cooperation, and agreed standards based on international norms. But, let me be clear, we will not accept protectionist agendas, disguised as arguments about financial stability,” said Hammond, at the dinner organised by the new financial industry lobby group UK Finance.
Since the vote for Brexit financial centres in the EU such as Frankfurt, Paris and Dublin have been vying for business that may have to leave the UK.
The Frankfurt-based European Central Bank has also said it should have more powers over euroclearing – the €1tn (£880bn) market for clearing of financial products denominated in euros, which is currently dominated by the City.
A survey published this week named London as the world’s top financial centre – although Frankfurt and Dublin both moved up the league table.
Hammond said: “It is my priority as chancellor to ensure that the UK remains the financial services centre of the world.
“We have the timezone, the language, the legal system, the talent, the capital markets, and the tech centre to succeed,” he added, saying that he also wanted the UK to be a leader in financial technology.
He was speaking after chairing the first meeting of the business advisory group with the Brexit secretary, David Davis, the business secretary, Greg Clark, and representatives from industry lobby groups such as the employers’ body the CBI, and the Institute of Directors.
He said that the meeting had confirmed “that getting clarity soon on issues such as transition, is of vital importance to business – and thus the economy”.
He wanted to avoid a “cliff edge” for business and individuals and said that no existing trade agreement supports the scale of business between the UK and the EU.
Stephen Jones, chief executive of UK Finance, said the UK needed a “genuinely ambitious 21st century trade deal that reflects the needs of a modern, service-based economy”.
He said the industry was working with the government on the development of a cross-border services agreement so that “an EU firm providing services cross-border to a UK customer should be afforded regulatory treatment that does not unnecessarily disadvantage it vis-à-vis a UK-based firm – of any national identity – and vice versa”.
Jones also added the City needed to improved its reputation with the public. “We cannot expect the interests of the UK as a global financial centre to be acknowledged and prioritised by government and regulators, or welcomed by wider society, if we appear unwilling or unable to put right the wrongs of the past”.
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