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UK and EU sign financial services pact, but fall short of a deal

The UK’s Chancellor of the Exchequer and Commissioner Mairead McGuinness have inked an agreement on financial services cooperation..but that’s about it.

Jeremy Hunt

HM Treasury

Jeremy Hunt, the UK’s Chancellor of the Exchequer, has signed an agreement with the European Union to boost financial services cooperation.

The deal, which comes two years after the UK left the EU, takes the form of a Memorandum of Understanding rather any concrete binding legal agreement. 

It will, however, establish an “ongoing forum for the UK and the EU to discuss voluntary regulatory cooperation on financial services issues”, according to a UK government statement. 

“Both sides will share information, work together towards meeting joint challenges and coordinate positions where appropriate on issues ahead of G7, G20 and other international meetings,” it added.

A deal between the UK and EU has been long awaited by firms and investors with years of uncertainty - and speculation - over regulatory alignment and whether Brexit could prompt firms to move to other junior financial centres in continental Europe. 

While the tens or hundreds of thousands of job losses predicted by many have not come, questions still remain about regulatory alignment and access to each others’ markets. 

"The UK and EU’s financial markets are deeply interconnected and building a constructive, voluntary relationship is of mutual benefit to us both, said Jeremy Hunt, Chancellor of the Exchequer.

"In the UK, our financial services sector is a true British success story. Together with the related professional services sector, it was worth £275bn last year, making up an estimated 12 per cent of the British economy,” he said.

"This agreement with our European partners as sovereign equals builds on our arrangements with the U.S., Japan and Singapore, helping to support the sector's role as a global financial services hub," he added.

Laimonas Noreika, the CEO of HeavyFinance, says greater economic cooperation between with the UK and the EU is critical for driving growth, tackling surging inflation and addressing climate change. 

“In a challenging economic climate, businesses across these markets need access to crucial financial support and investment to hire fresh talent, reduce their emissions and develop a cleaner, leaner working model. 

“This simply cannot be achieved without the financial systems in place to enable a regular flow of funding. This agreement is a step in the right direction to further expanding international collaboration in the financial services industry and will play a vital role in helping businesses transform for the better,” he added.

Fintech entrepreneur Khalid Talukder, co-founder of DKK Partners meanwhile said: “The UK’s financial services industry is a major driver of growth and building stronger links with the EU is in our national and economic interest. This agreement is another major step forward in develop a blueprint for a truly prosperous post-Brexit Britain, that has strong links with the substantial EU marketplace, but also has the ability to trade internationally in other parts of the world.

“In the face of stubborn inflation and rising interest rates, giving businesses a trade boost should be a top priority for the government this year and beyond,” he added.

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