Wood pyres are being piled up high, with EU regulations stacked upon them. It’s bonfire night come early – with European red tape in place of the Guy. That may be the wish of some, but it is not the wish of the banking sector.
London is Europe’s financial centre, funding business across the continent. That isn’t just good for European growth and jobs, it is good for the UK. Mainland European companies want access to London’s deep and liquid capital markets, and having major European banks based here is good for British businesses which want access to their specialist services.
Banking is the UKS biggest export industry by far, winning work from across the EU and bringing it back here, creating jobs across the UK – two thirds of them outside London. Without the exports from banking, our national trade deficit would be twice as big.
The only way to guarantee that UK-based banks (both British and foreign) can still provide the financing the European economy needs is for the UK to retain full access to the single market. If we start stripping away European financial services legislation, we are less likely to get single market access. It is not just that banks will no longer be able to sell certain services to European customers – the whole financial ecosystem is interconnected, and stripping away one regulation can have widespread consequences.
Tearing up EU regulations ahead of consultations on our future relationship would also send out the message that we are trying to gain a competitive advantage over those we are negotiating with. It will make them far less likely to make any concessions on the things we do want.
The brutal fact of the matter is that we will need as much negotiating capital as possible. This isn’t just because the UK is one country and they are 27, but that the negotiating process is stacked against us. As soon as the Government triggers the Article 50 application to leave the EU, then if we don’t get agreement on the terms of exit within two years, we will leave the EU without any agreements at all in place (a so-called “naked exit”), and revert to World Trade Organisation rules.
We need to stay committed to retaining existing EU regulations, and implementing those that have already been agreed, such as MIFID 2, which governs the rules on selling securities. We also want to ensure that forthcoming EU legislation is transposed into UK law, such as the fourth EU anti-money laundering directive, which is due to go to a vote in Parliament.