LONDON – The United Kingdom and the European Union have yet to find a solution for the financial services industry after Brexit, and recent data suggest that Brussels may have the upper hand in negotiations.
This was a major topic of debate after the UK vote to leave the European Union in 2016. The City of London, the British business district, wants access to the European market as it forms an important part of its activities. On the other hand, the city is also an important source of funding for European businesses.
However, Brexit has inevitably changed this relationship. By leaving the EU, the UK has lost access to the free flow of people, goods and services from the EU, and this is affecting the functioning of financial services.
European financial hubs, opponents of London, took advantage in the weeks after the UK put an end to EU rules on 31 December. The Dutch capital Amsterdam, for example, recorded an increase in the number of transactions. A whole lot of the euro-dominated financial products were also completed outside London.
“The move in trading shares in EU-listed names from the UK to the Netherlands was certainly unprecedented in its scope, and the fact that it all took place overnight on the fourth of January. But it was not unpredictable,” said David. Howson, president of the pan-European stock exchange CBOE Europe, told CNBC’s “Squawk Box Europe” on Wednesday.
The EU and the UK agreed in the early part of 2021 to work on their financial services relationship. However, there is a general opinion that Europe will not recognize the British rules as equal to their own, which frees the ability of British businesses to trade freely in the bloc.
“I see no likelihood of an equality agreement,” Howson said.
“There is certainly no incentive for the European Commission and ESMA (European Securities and Markets Authority) to look at equivalence, as the share of trade, as we have said, has moved to Europe fairly permanently,” he added. .
Andrew Bailey, governor of the Bank of England, said earlier this month that it would be a ‘mistake’ if the EU decided to block the City of London in any way.
“The EU has argued that it needs to better understand how the UK intends to amend or change the rules going forward. This is a standard to which the EU has no other country,” Bailey said in a statement. said.
However, the EU argues that, without understanding how the UK will proceed with financial regulation, it cannot recognize it as equivalent to their own.