Lord David Frost said the City of London needs to “get on and do its own thing” after Brexit as he suggested equivalence might be unlikely. The Brexit minister also told a House of Lords committee last month that Brussels will continue to take decisions on equivalence that are “in their interest”. UK financial firms lost their wide ranging access to EU markets when the Brexit transition period came to an end on December 31 and now have to navigate a patchwork of regulations from member states.
The only way the City of London can regain its pre-Brexit access to the EU is if Brussels unilaterally grants regulatory equivalence.
However, the bloc believes the UK is destined to diverge from its financial services regulations and has withheld the designation.
John Garvey, global head of financial services at PwC, told the Telegraph that although he doesn’t expect a deal imminently, there will come a point when Brussels realises an agreement is in its own interests.
In an exclusive interview with Express.co.uk, Italian MEP Antonio Maria Rinaldi accused the EU of trying to punish the City of London because of Brexit.
However, he insisted Brussels will eventually fail, as the City will come out stronger thanks to Britain’s withdrawal from the bloc.
He explained: “The City will be even more powerful thanks to Brexit and for a very simple reason: the markets there are much faster and smarter.
“The EU can put up whatever imposition it wants but in the end it is the competition of the markets that will triumph.
“And since the tradition of the City is superior to any other place, it will remain the main European financial centre.”
He added: “I wouldn’t worry that much… they said five years ago that Brexit was going to be an apocalypse.
“I think it has been a godsend, instead.”
Despite admitting that the trade deal struck with the EU on Christmas Eve failed to meet his ambitions on financial services, Prime Minister Boris Johnson has always dismissed the warnings European financial hubs could steal away the City of London’s supremacy.
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In 2018, Mr Johnson was hailing London’s financial sector during a speech at the UK-Africa Investment Summit when he took the swipe at German Chancellor Angela Merkel.
The Prime Minister said: “One Tube stop away and you’ll be in Canary Wharf where, along with its older siblings in the City, trillions of pounds in capital are being raised for every venture you can think of, from French construction to African telecoms to American cancer-curing drugs.
“It may give you some idea of the scale of the financial services in London when I say Canary Wharf alone is a bigger banking centre than the whole of Frankfurt.
“We have the tech, tech of all kinds and we have, by far, the biggest tech sector anywhere in this hemisphere.”
Earlier this year, Chancellor of the Exchequer Rishi Sunak hailed the potential for a “Big Bang 2.0” in the City of London after Brexit as he hinted that the Government is ready to slash red tape.
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The Chancellor raised the prospect of a Margaret Thatcher-style surge for the City.
He stressed that while equivalence and other elements were important, his main focus would be to make sure the Square Mile “remains the most dynamic place to do financial services anywhere in the world”.
In an interview with City AM, Mr Sunak said “there are many things in the deal that are good for financial services”.
He cited the free flow of data, business travel, and agreements on legal and professional services – as well as suggesting a deal on regulation will be done soon.
Mr Sunak told the publication: “There is strong language on future regulatory cooperation, and putting in place a Memorandum of Understanding in reasonably short order to have that structured regulatory dialogue.
“And there’s a forum for future equivalence decisions as well. That’s a positive.
“But regardless of all that, I think it’s important that we get on and make sure that the City of London remains the most dynamic place to do financial services anywhere in the world.”
Referring to Brexit enthusiasts who claim that the City can now enjoy another Nineties’ style leap forward, Mr Sunak said they “make a really, really good point”, adding that people were free to “call it Big Bang 2.0 or whatever”.
He added: “If you look at the history of the City stretching even further back than that, it has always constantly innovated, adapted and evolved to changing circumstances and thrived and prospered as a result. And I think it will continue to do that.”
Mr Sunak said the Treasury would “play a role in that, and all the businesses and the people involved will help us do that”.
However, the Chancellor also played down the need for fundamental change in the City, pointing to its natural advantages and the “culture and creativity of our people”.
He noted: “Regulation is important, of course, as is timezone, as is language. All of those things are important.”