Dominic Raab dismisses EU threat to City of London
Brexit negotiations with the EU started up again in mid-January, with talks on financial services. After months of wrangling, new rules for trade were finally agreed on Christmas Eve, just days before the year-end deadline. However, in a document spanning over 1,200 pages, there was very little mention of financial services: a sector which accounts for seven percent of the UK’s economy and 10 percent of its tax receipts.
The two sides hope there will be a “memorandum of understanding” in place by the end of March.
The agreement will seek to ensure the two sides continue to have similar regulations going forwards that mean similar standards are upheld both in Britain and on the continent.
According to Lee Rotherham, the former director of Special Projects at Vote Leave, there is a simple explanation why the deal did not include an arrangement for financial services.
He wrote in a report seen exclusively by Express.co.uk: “Overall, the Services section seems like an average FTA, enabling activity up to a point.
“It is worth remembering that of the so-called ‘Four Freedoms’, [Services] is the area that was least pursued by the EU.”
He noted: “The UK wanted it; the Germans and French wanted to focus on goods, which was to their economic advantage.”
It is no secret that the bloc’s main hubs, such as Frankfurt and Paris, have been trying to use Brexit to spell the end of London’s status as one of the world’s leading financial hubs.
Already in 2018, Mr Macron rejected the idea of a tailored Brexit deal for the City, insisting Britain would have not been allowed full access to European Union markets, including financial services, unless it paid into the EU budget, accepting all its rules.
And in October last year, Cedric O, the French Junior Minister for Digital Affairs, revealed how Paris is hoping to take London’s spot as the start-up destination for emerging financial technology.
Macron’s plot to overtake City of London could be scuppered by new post-Brexit rules
French President Emmanuel Macron
Mr O told Sifted: “There’s more international talent coming to France, as well as more French talent coming back, including from the US.
“The next step is making France a real international hub, as London was able to do before.
“Brexit is a huge opportunity for us, for immigration reasons, to become the new international hub.”
France has already overhauled its tech visa to make it easy for start-ups to employ foreign talent — and Mr O hopes that plenty of Brexit-weary Britons will take advantage of this.
He also argued the stars are aligned for Paris to overtake London as a global hub for international tech talent, but also as the European capital for fintechs.
At the moment, Paris is home to 1,200 fintechs according to Dealroom data, and London to three times as many.
Mr O added: “The financial sector is one where we can take advantage of Brexit.
“We see the pace of fintech growth in France accelerating. The French quality of life and the quality of Paris as a finance hub are factors.”
City of London
Despite France’s intentions, things might not be so easy for Paris.
Instead of waiting for the EU to grant London equivalence, the UK has decided to change its strategy.
A report commissioned by the Government has emerged, in which Lord Jonathan Hill makes 15 recommendations aimed at turbo-charging the City.
Lord Hill – who served as EU commissioner for financial services until the Brexit vote – called for a range of deregulatory measures that would aim to “ensure the UK remains one of the most attractive places to grow and list successful, innovative companies”.
The report, which is believed to have been very well received by Chancellor Rishi Sunak and Prime Minister Boris Johnson, suggests opening up London to Spacs (Special acquisition companies), the so-called blank cheque firms that have become one of the most popular trends in finance.
Lord Hill also called for a swathe of deregulatory measures that would make London a more enticing destination for companies to go public, while also giving more power to start-up founders after listing on the London Stock Exchange.
In his Budget speech on Wednesday, Mr Sunak welcomed the report, saying: “Let me thank Lord Hill for leading this landmark review.
“The Financial Conduct Authority (FCA) will shortly be consulting on his proposals.”
The Chancellor also noted Lord Hill’s report “more than delivered” on proposing “bold ideas” on how to improve the City’s competitiveness in the long-term.
He added: “I’m keen we move quickly to consult on its recommendations, cementing the UK’s reputation at the front of global financial services.”
Chancellor of the Exchequer Rishi Sunak
Similarly the FCA said it will “carefully consider” the recommendations and plans to make relevant rules by the end of the year, subject to consultation feedback.
Spacs are created to raise capital by going public, with the purpose of then acquiring an existing company.
They offer private companies a faster and more predictable way to go public.
Spacs have enjoyed popularity in the US – almost 180 Spacs have been filed in New York alone – but current regulation means that none have launched in London.
Financial services lobby group TheCityUK said it was in favour of all Lord Hill’s proposals, including the call to “liberalise” regulations to allow Spacs to list in the UK.
TheCityUK chief executive Miles Celic told City A.M.: “The UK has one of the world’s foremost listing regimes, but we cannot be complacent in the face of fierce competition from the US and increasingly from financial centres in Asia.”
Edward Twiddy, chief customer officer at fintech Atom Bank, also noted the policies recommended by Lord Hill would make the UK a more attractive investment hub for successful start-ups.
He said: “Constant evolution and refinement of the investment and regulatory landscapes are key drivers for achieving this goal, and Atom is fully behind the proposals to ensure that there are more routes for fintechs to achieve a public listing, which we believe will benefit companies, investors and competition alike.”
Victor Trokoudes, co-founder and chief executive of fintech Plum, added: “As Plum is a high-growth company with international ambitions, we want to know that the UK is the right place to grow and mature.
“Innovations like the ones outlined in today’s Budget show the Government is heading in the right direction, towards building very big businesses.”