‘Turning point’: EU and UK strike deal to boost financial cooperation

The agreement will establish a forum through which the two sides will discuss voluntary regulatory cooperation on financial services issues.

Jeremy Hunt, the British finance minister and Mairead McGuinness, European Commissioner for financial services, signed the Memorandum of Understanding (MoU) in Brussels.

McGuinness told reporters that although the UK is no longer in the EU, “we still share many of the same issues and challenges like fighting financial crime, supporting sustainable finance and enabling digital finance. So it’s really positive that we’ve had this structured cooperation in place.”

Hunt, meanwhile, said the UK is “absolutely delighted” with the MoU. “We also see it as an important turning point. We have a shared interest in global financial stability.

“The UK is the biggest financial services sector in Europe and we have a particular responsibility to work closely with the EU to make sure that both sides are doing more, to make sure that we have that stability that is so important.

“We see this very much as not the end of the process, but the beginning,” he added.

The aim is for the forum to meet bi-annually with the first meeting scheduled in the autumn.

A spokesperson for the European Commission stressed however that the forum “does not restore UK access to the European Union”.

The financial services sector is hugely important for the British economy with the sector contributing £173.6 billion (€201 billion) in 2021, equivalent to over 8 per cent of total economic output.

The country’s exit from the EU, finalised in January 2020, had stoked fears that London’s place as a leading global hub for financial services could be weakened by more restricted access to the EU.

But the impact has been more muted than anticipated as key regulatory frameworks, including equivalence for central clearing activities used to mitigate financial risk, have so far remained in place

The European Commission has already stated that it wants to have more clearing activities take place in the EU in order to end an over-reliance on UK-based services.

According to the British government, of the £11 trillion (€12.8 trillion) of assets managed in the UK in 2020, around 44 per cent was on behalf of international investors including the EU.

“The UK and EU’s financial markets are deeply interconnected and building a constructive, voluntary relationship is of mutual benefit to us both,” Hunt said in a statement.

The MoU will also allow Brussels and London to boost dialogue and cooperation on joint challenges and ahead of key international meetings including the G7 and G20. 

It is the latest sign that relations across the Channel have thawed since a deal was struck in February to resolve tensions over the Northern Ireland Protocol, which had poisoned ties for three years.