The European Union’s chief Brexit negotiator rejected the U.K.’s latest proposals for financial firms to do business with the 27-nation bloc after Brexit, accusing Britain of trying to keep as many of the benefits of the single market as it can.
Michel Barnier dismissed Britain’s desires, which he said would let firms keep operating from the City of London, with employees flying in and out of the EU for short business trips. The proposals could even “create a significant risk” of avoiding regulation altogether.
“There is no way member states or the European Parliament would accept this!” Barnier said on Tuesday in the speech to the Eurofi financial conference. The U.K. “would like to make it easy to continue to run EU businesses from London, with minimal operations and staff on the continent.”
The U.K. and EU have made next to no progress in negotiations over their future relationship — which includes an accord on financial services — despite talking since March. A fresh round of discussions started on Monday, with both sides vowing to move forward in an attempt to get a deal before October, two months before Britain’s final parting with the bloc.
Wall Street banks and the finance industry have pressed hard for the ability to continue using their London hubs for investment banking and trading business with European clients. As the year-end draws closer, banks are re-activating plans to move staff and business if the two sides can’t reach a new market access arrangement.
Meantime, the so-called equivalence process through which the EU can open access to London firms has run into trouble, Barnier said. Under the EU’s equivalence rules, foreign firms can be given access to the bloc only if officials in Brussels think the rules are tough enough in the companies’ home state.
“I know that many hope our equivalence decisions will provide continuity,” Barnier said. “Many believe that ‘responsible politicians’ on both side of the Channel should make this happen — but things have to change. The U.K. and the EU will be two separate markets, two jurisdictions. And the EU must ensure that important risks to our financial stability are managed within the framework of our single market”.
While the two sides committed to make progress in their equivalence assessments by this month, Barnier said the U.K. has answered only 4 of 28 EU questionnaires on regulations. “These assessments are particularly challenging,” Barnier said.
Britain has consistently argued that the regulations start at the same place in both jurisdictions, which should make the equivalence process simpler. “The U.K. has been able to complete our own assessments on time and we are now ready to reach comprehensive findings of equivalence as soon as the EU is able to clarify its own position,” a U.K. Treasury spokesperson said.