An overhaul of UK financial services regulations is set to be included in the upcoming Queen’s Speech as the government steps up efforts to make the city more competitive after Brexit.
Chancellor Rishi Sunak updated the cabinet on Tuesday on UK plans to scrap EU financial services rules, Treasury sources inform AM City that the package of measures should be presented to parliament later this year.
Many Tory Brexiteers have called for an overhaul of city rules, now that the UK no longer needs to follow the EU’s regulatory regime, in a bid to boost global competitiveness.
This includes former Cabinet Minister Lord David Frost.
Frost sent a “gushing note” about the work Sunak was doing on scrapping regulations just before he left the cabinet last month, according to an ally of the chancellor.
A Treasury source said Sunak’s push for a regulatory overhaul shows he “gets the vibe and is above these things…at a time when there must be potential dividends from the Brexit”.
The Office for Budget Responsibility estimated in October that Brexit would reduce the UK’s potential gross domestic product (GDP) by 4% in the long term.
The financial services sector has been slightly affected since Brexit, with much of the equity trading activity shifting to other European capitals last year.
Long-awaited regulatory changes, which Sunak said last year would help herald a ‘Big Bang 2.0’ in the city, are now in the final stages of finalization as the Treasury concludes its consultation on the review of the future framework regulation (FRF) on February 9. .
The package will include a relaxation of capital requirements for the insurance sector, which are part of the European Solvency II directive, to free up money for companies to invest.
Another proposal being considered is a change to stock listing rules to make London a more attractive destination for tech start-ups to go public.
Ministers will also introduce regulations to ensure consumers continue to have access to cash in an increasingly cashless society. time, within reasonable travel distances.
It is understood that ministers are considering 19 potential measures in total.
Andrew Pilgrim, head of government and financial services at EY, said any relaxation of capital requirements for financial firms would be a huge win for the city.
He said: “What kind of adaptation can you make to the capital needs of the UK to get more investment in infrastructure, the green transition, the digitalisation of the economy and the leveling of regions in the UK United?”
“To me, that feels like where the focus should be and where it is right now.”
Tulip Siddiq, Labour’s shadow economic secretary to the Treasury, said: ‘Labour wants to see more successful businesses register here in the UK. We must balance the need for regulation that supports financial stability as well as competitiveness.
“The Conservatives let financial services down during negotiations. Labor will make Brexit work with practical improvements to build on the deal in the national interest.
The city lost its widespread access to EU markets early last year when the UK left the bloc’s single market and customs union.
The only way to reverse this trend is for the EU to grant equivalence to the UK – a designation given only if Brussels believes the other country will remain in its regulatory orbit for financial services.
It has been speculated that Sunak’s drive to break away from EU financial services regulation is another nail in the coffin of UK equivalence hopes.
The Treasury declined to comment.