Brexit: Expert warns of ‘no deal scenario’ in five years
The UK and EU agreed a comprehensive trade agreement on Christmas Eve, which came into force on January 1. But there was very little mention of financial services in the agreement, with negotiations on the issue beginning this week.
The industry acts as the backbone of the UK economy, with the Government eager to agree a deal as soon as possible.
Financial services contributed £132billion to the economy in 2018, almost seven percent of Britain’s total economic output.
Last year the City of London exported £25billion of services to the EU, making Europe a key market on which a finance deal must be negotiated.
However, speaking to MPs yesterday Mr Bailey said the UK must not let Brussels dictate the terms of the agreement and Britain must not be forced to follow EU rules.
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He told the Treasury select committee: “I would strongly recommend that we do not become a rule-taker.
“I think that is a very bad place to end up.”
Brussels is yet to rule on so-called “equivalence” for UK firms, in which the trade bloc will determine if it is satisfied Britain’s rules and regulations are suitably compatible with its own that firms in London can have access to the EU market.
The UK has already granted equivalence status to EU finance firms in 17 areas, but Brussels has so far only given British businesses temporary equvilance status.
The bloc may demand the UK remain strapped to its rules as a condition to giving London access to the continent.
Mr Bailey warned such an outcome would be bad for Britain and must be rejected by negotiators.
He said: “If the price of that is no equivalence, then I’m afraid that will follow.
“That is the wrong outcome for the UK, but if that is where it goes.
“I am strongly opposed to rule-taking.”
Sam Woods, a Deputy Governor at the Bank, said he remained optimistic the EU would not try to shackle the City to its rules.
He said: “I don’t think we are on that rule-taker path at all.
“There is an absolute recognition that both sides need to evolve their rules and will do so in their own way.
“If you had to be a rule-taker to get equivalence, you would be crazy to do that deal.”
A deadline of March has been set to reach an agreement on arrangements for finan cial services.
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