The breakdown of regulatory cooperation between the UK and EU on financial services has become “collateral damage” in the dispute over the Northern Ireland protocol, according to peers.
The House of Lords committee tasked with examining how Brexit is hitting the City of London raised concerns on Thursday about the lack of a functioning framework for cooperation between the UK and the EU.
He noted that the UK government has been reluctant to engage with Brussels and urged both sides to talk about financial services at a political level.
Lord Kinnoull, also known as Charles Hay, chairman of the committee, told the Financial Times that efforts to secure financial services cooperation post-Brexit had been “seriously affected as collateral damage” from the continuing dispute over trade agreements with Northern Ireland.
British ministers plan to introduce legislation that will scrap parts of the Brexit deal on the Northern Ireland Protocol, prompting the threat of legal action from Brussels.
Hay said the breakdown of co-operation on financial services was “evidence of the problems resulting from the debacle of the Northern Irish protocol”. He added: “Resolving the Northern Ireland protocol would unlock a lot for the mutual benefit of all.”
The committee said a memorandum of understanding on regulatory cooperation, which had been promised by the two sides but has yet to be signed, was stalled due to difficulties in relations between the UK and the EU. EU.
The committee said the memorandum of understanding should be a priority for the government alongside other “political and diplomatic engagements with the EU on financial services”.
The report also found that the absence of EU equivalence rulings on financial services reflected a political decision from Brussels, which kept the UK “at a higher level than other countries”.
But given this political motivation, the Lords committee said it would be “unwise for the government to base its financial services strategy on a process which it cannot control and which currently appears unlikely to bear fruit. “.
The commission found that fewer financial services jobs migrated to the EU as a result of Brexit than some feared. Estimates suggest around 7,000 jobs have migrated, he said, while warning against complacency ‘as it is not yet clear whether the employment impact of Brexit has fully subsided. play”.
The European Central Bank is carrying out an “office mapping” exercise, which is expected to lead the regulator to call for more financial services roles to be transferred within the EU from London.
Separately, on Thursday, the Treasury select committee announced it was forming a sub-committee to look into proposals for post-Brexit financial regulation in the UK, replacing the role previously played by the EU.
There will be “a huge volume of regulation cascading through regulations, so it’s important that parliament is scrutinized,” said Mel Stride, MP, chairman of the committee.
“There is a natural tension between safety and soundness and regulatory relief to improve our international competitiveness,” he added.
Stride also commented on the findings of the Lords report. “There has been a lot of talk for a long time about equivalence and how to insert London into the EU market after Brexit. It has yielded little fruit so far,” he said declared.
“The fallout on Northern Ireland is just another thing that makes it more difficult. But that’s not the main cause of the problem.