Philip Hammond, the British Chancellor, has defended the Brexit plan of Theresa May, the British Prime Minister, after the City of London Corporation slammed the proposals.
In an article published in the Financial Times, Hammond said that the long-awaited white paper would enable the City to “flourish” despite dropping his original “mutual recognition” plan, which would have enabled the financial services to have easier access to the European Union.
The remarks come after Catherine McGuiness, the policy chairman of the City of London Corporation, said that the Brexit white paper was “a real blow” to the financial services industry of Britain.
In his response, Hammond stated: “We set out a realistic framework that provides sufficient stability and certainty for the market to operate.”
He added: “This is less than mutual recognition, but it is more than the EU’s equivalence regime. It is a model that preserves the stability, transparency and certainty of the former while respecting the sovereignty of the latter.”
In the past, the chancellor has argued that the “UK could not become a rule-taker in financial services.”
Even though equivalence means that both sides recognise and mirror the rules and legislation of each other, the European Union could force the United Kingdom to accept the rules that it does not like to be able to maintain access to the bloc.
The governor of the Bank of England, Mark Carney, has warned that this could result in a loss of regulatory control and impose a threat to financial stability.
McGuiness stated: “Equivalence in its current form is not fit for purpose so any ‘enhancements’ to this regime would have to be substantial”
She added: “As the EU’s gateway to capital, the UK is a significant trading partner for the bloc. It’s in the interests of households and businesses on both sides of the Channel that an ambitious future trading relationship, covering services as well as goods, is secured.”
She continued: “Failing to secure such a deal would put up unnecessary trade barriers and runs the risk of fragmentation of financial markets, increasing costs and reducing choice for consumers.”
The chief executive officer of TheCityUK, Miles Celic, stated: “The overriding issue for financial and related professional services firms is the ability to continue serving customers and clients.”
She added: “Mutual recognition would have been the best way to achieve this. It’s therefore regrettable and frustrating that this approach has been dropped before even making it to the negotiating table.”