London, Dec 27:
Brexit offers Britain a chance to do things differently in financial services, finance minister Rishi Sunak said on Sunday, but it will co-operate with the European Union on an approach to the sector despite little detail on the topic in its trade deal.
From Jan. 1, British-based financial services groups lose automatic access to the EU's single market, and both sides have said new market access must be negotiated outside the trade agreement in specific equivalence deals.
"Now that we've left the European Union, we can do things a bit differently (in financial services)," Sunak told broadcasters.
Britain and the EU clinched a trade deal on Thursday, but Prime Minister Boris Johnson has admitted it is an accord which does not have as much as he would have liked about the financial services sector and regulatory equivalence.
Under a system known as equivalence, access to EU markets will not be granted to banks, insurers and other financial firms based in Britain unless their home rules are deemed by Brussels to be "equivalent", or as robust as regulations in the bloc.
The two sides will aim to agree a memorandum of understanding on regulatory cooperation in financial services by March 2021, and Sunak said that such language should provide reassurance.
"This deal also provides reassurance because there's a stable regulatory co-operative framework mentioned in the deal," he said.
"I think (that) will give people that reassurance that we will remain in close dialogue with our European partners when it comes to things like equivalence decisions."
However analysts have said it had long been clear that the agreement would offer the City of London, a hub for international banks, asset managers, insurance firms and hedge funds, few assurances about future trade across the English Channel.
Britain sells roughly 30 billion pounds, or $40 billion, of financial services to the European Union each year, profiting from an integrated market that makes it easier in some cases to sell services from one member country to another than it is to sell services from one American state to another
The new trade deal does smooth the flow of goods across British borders. But it leaves financial firms without the biggest benefit of European Union membership: the ability to easily offer services to clients across the region from a single base. This has long allowed a bank in London to provide loans to a business in Venice, Italy, or trade bonds for a company in Madrid.
That loss is especially painful for Britain, which ran a surplus of 18 billion pounds, or $24 billion, on trade in financial and other services with the European Union in 2019, but a deficit of 97 billion pounds, or $129 billion, on trade in goods.
“The result of the deal is that the European Union retains all of its current advantages in trading, particularly with goods, and the U.K. loses all of its current advantages in the trade for services,” said Tom Kibasi, former director of the Institute for Public Policy Research, a research institute.
“The outcome of this trade negotiation is precisely what happens with most trade deals: The larger party gets what it wants and the smaller party rolls over.After Jan. 1, the sale of such services will hang on whether European regulators decide that Britain’s new financial regulations are close enough to their own to be trusted, a process that excludes some common banking activities and leaves others subject to political considerations.
Already, Britons living in Europe who have bank accounts in Britain have been told their accounts will be closed. In announcing the trade deal this week, Prime Minister Boris Johnson of Britain acknowledged it offered “not as much” access for financial firms “as we would have liked.”
But he was not as straightforward about the difficulties facing even British retailers under the deal, analysts said.