The City of London’s highest official calls for closer cooperation between Britain and the EU

The senior City of London official has urged the UK and EU to sign a regulatory cooperation agreement on financial services, as she warned British companies that hopes for ambitious deals on market access to the bloc have been dashed.

Catherine McGuinness, head of the City of London Corporation’s Policy and Resources Committee, told the Financial Times it was important for the UK and EU to finalize a memorandum of understanding on regulatory cooperation.

As a senior policymaker for the Square Mile local authority, McGuinness called on the UK government to allow more foreign workers into the city, raising concerns that its “leveling up” agenda to promote abandoned areas could harm the British capital.

By the time the UK and EU finalized their post-Brexit trade deal in late 2020, Boris Johnson admitted it fell short of his expectations for UK financial services firms.

British companies hoped to secure a high level of market access through the EU, believing that UK regulation of the industry was equivalent to rules in place in the bloc, but Brussels has amid strained post-Brexit relations between the two largely refused to proceed on this basis pages.

The EU and the UK also failed to sign a memorandum of understanding on a “financial regulatory forum” to discuss rulemaking for the sector, which the two sides agreed in principle to set up last year.

McGuinness, who will end her five years as Chair of the Square Mile’s Policy and Resources Committee next month, called on the UK and EU to implement the memorandum.

“What’s really important is that we keep talking and working together,” she said. “We would be pleased to officially activate the cooperation agreement for regulators.”

Since Brexit, Brussels has made just one decision saying UK regulation is equivalent to EU rules, meaning the bloc’s banks can continue to use UK clearinghouses until 2025.

British financial services firms had hoped for similar equivalency decisions from Brussels, covering other areas of activity, but amid tensions between the two sides, particularly over Northern Ireland’s post-Brexit trading relationship, none materialized.

McGuinness urged the city to move on, saying “equivalence is a ship that has sailed”.

But she also said Brexit was no longer an “existential threat” to the city, adding: “Obviously we’ve lost business. Of course, this still causes ongoing problems for companies as they navigate exactly how to structure their businesses.

“But fewer jobs have moved than we originally forecast [and] Hopefully we are getting through the worst of the strained relations we have had with our EU partners and I hope that we can start to get on a more positive footing with them individually and collectively.”

John Glen, Treasury Secretary for Economic Affairs and City Minister, roughly agreed with estimates by accounting firm EY on Tuesday 7,000 jobs have moved from the Square Mile to the EU since Brexit.

According to EY’s initial estimates, job movements were much higher: 12,500 in 2016, at the time of the Brexit referendum.

Meanwhile, McGuinness said the government needed to look at immigration because there was a need for skilled workers in the city as competing overseas financial centers struggled to take business away from the UK.

“I think we need to be really careful that our firms continue to have access to the best international and local talent and make sure our immigration system allows for that,” she added.

McGuinness also warned the government not to forget London as it considers measures to upgrade other parts of the country.

She said there was a “very real risk” that the British capital would be overlooked by ministers. “I really remind them that if you dismantle London, the rest of the country doesn’t automatically benefit. It could damage it.”

The city is working through the effects of the coronavirus pandemic, which has forced many businesses in the Square Mile to send workers home during the lockdown and which in turn has hit small businesses like pubs and shops that rely on commuters.

According to McGuinness, local businesses need to adapt to changing circumstances as many employees in the finance and services industries work hybrid, spending two or three days a week in the office.

“It’s too early to tell what the long-term pattern of work will be,” she added. “I suspect this will lead us to a different pattern. If only 80 percent of the people come, that’s a change in the demand pattern. Businesses need to adapt.”

However, McGuinness highlighted that new planning applications are being submitted by developers for City buildings, which she says indicates that demand for offices in the Square Mile remains strong.

“Everyone is committed to their central office space, but maybe they plan to use it in other ways,” she said.

“We need to make sure we’re providing the right type of office space. People tell us they have different needs, more collaboration, more space, more flexibility and more and more access to nature.”

Chris Hayward, vice-chair of the Policy and Resources Committee, is believed to be McGuinness’s most likely successor.

She said her tenure has been largely about “building or rebuilding post-Brexit relationships and looking at the new shape of relationships with the rest of the world”.

Additional reporting by Philip Stafford in London The City of London’s highest official calls for closer cooperation between Britain and the EU

Adam Bradshaw

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