Fish talks cast gloom over Brexit
UK finance sector sees little hope in accessing EU markets over fishing concerns in British waters
LONDON—HIGH hopes of prioritizing Britain’s financial sector goes down the drain as the European Union pushes for fishing access to UK waters, drawing the industry into a political struggle between the bloc and its departing member. Bank sources say a push by the European Union for fishing rights and London’s stance that it will diverge from EU rules are prompting them to review hard-brexit plans.
London—britain’s finance sector is losing hope of securing even basic access to EU markets from Dec. 31, 2019, as talk that the European Union wants UK fishing rights in exchange draws the industry into a political struggle between the bloc and its departing member.
Hopes were high that Prime Minister Boris Johnson would prioritize the financial sector— Britain’s largest export industry and biggest corporate tax generator—in trade talks.
But bank sources say a push by the European Union for fishing access to UK waters and London’s stance that it will diverge from EU rules are prompting them to review hard-brexit plans that could see more jobs than anticipated move to Europe.
Until now, financial firms running EU operations from Britain believed that technical assessments by EU banking, insurance and markets regulators would be enough judge UK rules ‘equivalent’ to those governing Eu-based firms, granting them market access after December.
But banking sources say the EU’S executive now sees things differently.
Sources from three international banks fear that access will depend on a broader tradeoff such as Britain allowing fishing in its waters—a concession they feel the government is reluctant to make.
“We’re now hearing very explicitly—it’s not even the rumor mill—the European Commission has said these are politically linked to progress in phase-two negotiations,” one banking source told Reuters.
169 times less
“As one official put it to me, if ‘fish for financial services’ is going badly, this will impact the Commission’s willingness to grant equivalence.”
The fishing industry is valued at about 169 times less than financial services and official data shows it employs just 8,000 people compared to more than a million in finance.
But regaining control of Britain’s rich fishing waters was a totem for Brexit campaigners.
A European Commission spokesperson referred to a January EU document saying the bloc and Britain should endeavor to complete equivalence assessments before June 30. He declined to comment further.
The European Union is Britain’s biggest financial services export market, worth about 26 billion pounds annually.
Since the 2016 Brexit vote, the sector has reorganized to preserve a foothold in the European Union, launching or beefing up subsidiaries and relocating staff and capital. Many banks and money managers are preparing for a further transfer of resources after a transition period ends in December.
Consultants EY said this week that around 7,000 financial services jobs would move from
Britain to staff new EU hubs.
Failing to obtain equivalence could add risk-management, compliance, middle and back office roles to that figure, as well as trading and client-facing jobs, the sources said.
Same effect
Finance minister Sajid Javid said last week that Britain would not be a rule-taker after Brexit, even though some businesses could suffer from regulatory divergence.
He wants “outcomes-based” equivalence in financial services, meaning UK rules need not be identical to those in the European Union but should have the same effect.
The European Union updated its equivalence policy ahead of Brexit, saying third-country regimes like those in Japan and the United States do not need to be identical but must have the same “outcomes” as EU rules to give access to its markets.
But it would impose tougher scrutiny of “high-impact” countries, expected to include Britain.