The Chancellor’s view for a post Brexit UK Financial Services Market
The Lord Chancellor, Philip Hammond’s speech delivered on 7 March 2018 from Canary Wharf has gone some way to clarifying the UK Government’s vision…
The Lord Chancellor, Philip Hammond’s speech delivered on 7 March 2018 from Canary Wharf has gone some way to clarifying the UK Government’s vision for securing the stability of the UK financial services sector post Brexit.
The Prime Minister, Theresa May, set out during a detailed speech on Friday 2 March 2018 the UK’s expectations for a successful post Brexit deal. Philip Hammond has, following this, provided some insight into the future of the financial services sector, stating that it is entirely possible for the financial services market to be the subject of an individual free trade agreement and further, that it is in the mutual interest of both the UK and European Union (“EU”) for this to be negotiated. Such a conclusion was in part based on the EU’s previous attempts to negotiate financial services co-operation with the USA under the Trans-Atlantic Trade and Investment Partnership (“the TTIP”), proposed originally by Michel Barnier. Whilst the negotiations lasted almost four years before collapse, they are indicative of a willingness by the EU to secure regulatory alignment on financial services as a stand alone deal. Moreover, if negotiations could commence with America whose financial regulation is far from aligned with the EU, then the achievement of alignment with the UK appears much more realistic.
Referring back to his Mansion House speech in June 2017, Philip Hammond reminded the EU’s negotiators of the UK’s three principles for a future partnership in financial services:
- Establishment of a process to establish regulatory requirements for cross border trade;
- Reciprocal and reliable cooperation arrangements that prioritise financial stability; and
- A legal framework to support the reliability of any such arrangements.
In response, Donald Tusk, the EU’s President has rejected the UK proposals for a free trade agreement for financial services and has told the UK that it will have to settle for a more conventional free trade agreement, such as the EU’s deal with Canada. Michel Barnier has responded by stating that the EU has never done a deal like this before. That is readily accepted by Philip Hammond but is not a reason to not try, particularly as the UK manages 1.5 trillion Euros of assets on behalf of EU clients.
The speech by Philip Hammond could be viewed as echoing earlier calls by the financial services market for a negotiated sector by sector approach by the UK to Brexit. A stand alone free trade agreement for financial services is imperative in view of the loss of passporting post Brexit. Insurance policies will need to be serviced. Insurers ought to be able to write business cross border within the EU without the hindrance of any breaks or any requirement for them to establish a subsidiary within the EU and incurring the significant expenses that would entail.
The urgency remains for insurers who are fast approaching the cut off for renewals and new business which will exist beyond Brexit. Whilst the detail of the transition period, and specifically, its length is expected to be settled this month, more clarity and swifter action is required to maintain the business of brokers and insurers and facilitate contingency planning.
For further information please contact Jacqui Bickerton, Associate and Solicitor and Professional Support Lawyer.