Why we must NOT sign an EU deal for City, by Bank governor

BRITAIN must not sign a Brexit deal for the City which leaves the industry as an EU ‘rule-taker’, the Bank of England’s governor warned yesterday.

Andrew Bailey, whose first year at the Bank has been marred by the pandemic and Brexit jitters, said the UK could not simply pay ‘any price’ to reach a financial services agreement with the continent.

Though the UK’s £130billion financial sector is one of the biggest parts of the economy, contributing around 7 per cent of output per year, City firms were largely left out of the EU trade deal signed by the Prime Minister last month.

The Treasury plans to sign a ‘memorandum of understanding’ with the EU by the spring detailing how their relationship over financial services will continue. One option is so-called equivalence, where the UK and the EU agree to grant each other access to their markets if they deem their rules are closely enough aligned.

But while the UK’s financial sector has granted the EU equivalence in 17 areas,

‘Europe has refused to reciprocate’

Europe has so far refused to reciprocate. Mr Bailey warned the Government that it should be careful what it offers in return for access to the EU markets.

He told the Treasury committee yesterday: ‘I strongly recommend that we don’t become a rule-taker. If the price of that is no equivalence, then I am afraid that will follow. If the price of this is too high then we can’t just go for it whatever.’

The EU has been reluctant to sign an agreement on equivalence with Britain, claiming it needs more information on the country’s intentions to part ways with European rules.

Mr Bailey said this approach was ‘problematic’, and the bloc couldn’t expect Britain either to never change its rules or to simply accept whatever laws the bloc imposed. But he added: ‘ I think it’s important that we do have open markets, and I fail to see why people would want to close themselves off.’