Brexit Britain hits back at EU plot to poach UK financial firms – Bank of England steps in

Brexit: Expert discusses 'importance' of UK financial services

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Due to the number of firms which have left the UK to relocate to the EU, the Bank of England has drawn up restrictions in what was described as regulatory “over reach” by one banker. With the EU not granting UK firms equivalence, some companies have now relocated to financial capitals on the continent. However, the Bank of England must now be notified before doing so in order to restrict the number of firms that are looking to leave Britain.

One adviser to a bank in London, told the Financial Times: “Being told in advance of banks’ plans is one thing, but requiring regulatory approval first is quite another.”

Such is the concern the EU is increasing pressure on firms to relocate, Governor Andrew Bailey has taken a personal interest in the issue.

Other senior bankers have also expressed concern firms are now being trapped between the EU’s pursuit to reclaim companies and the demands of the UK central bank.

Since Brexit, the EU and UK have clashed over financial equivalence firms based in Britain.

However, the EU has refused to do so, meaning firms must now operate between regulatory frameworks.

Negotiations over a memorandum of understanding have been taking place between the two and will end this month.

Despite these negotiations, it is not thought the EU will grant UK financial firms full equivalence.

Indeed, the EU and UK agreed to set up a forum to discuss regulatory co-operation between the two.

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Under this regulatory framework, the EU may recognise UK financial as similar to its own but not completely grant firms full equivalence.

To grant full equivalence, the EU would need to approve on 40 separate areas of activity.

So far, London has granted the EU equivalence in 17 areas but Brussels has only granted the UK similar agreements in two.

Although some firms have relocated to Amsterdam, in particular in the derivative and share trading sector, estimates have shown only 7,600 jobs have been relocated to the EU from the UK.

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Without full equivalence, Sarah Hall, professor of economic geography at the University of Nottingham said: “The relationship is more one of competition than cooperation at the moment.

“It seems clear that both the UK and the EU are currently working to support their own financial services sectors.”

Indeed, the EU has claimed it will only grant full equivalence until it has guarantees the UK will not drop standards and regulations.

Documents have claimed to show the EU Commission pressuring companies to clear derivatives in the EU instead of the UK.

Commenting on the issue in front of a select committee hearing, Mr Bailey said: “Frankly, it would be a serious escalation of the issue.

“I have to say to you that would be highly controversial – and that would be something that we would have to, and want to, resist very firmly.

“I’m not going to obviously say how the government would react to that because that’s for the government to think about and we will work very closely with them on this but it would be a very serious escalation in my view of the issue.”

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