The severance of regulatory cooperation between the United Kingdom and the EU over financial services has become “collateral damage” in the dispute over the Northern Ireland Protocol, according to colleagues.
The House of Lords Committee looks at how Brexit London’s City on Thursday expressed concern over the lack of a functional framework for UK-EU co-operation.
The government of the United Kingdom was found to be unwilling to engage with Brussels and called on both sides to discuss financial services at the political level.
Lord Kinnoull, also known as Charles Hay, chairman of the board, told the Financial Times that efforts to secure a financial services corporation after Brexit were “severely hit as collateral damage” by the ongoing dispute over Northern Ireland’s trade arrangements.
British ministers plan to introduce a law that will reject parts of the Brexit agreement on the Northern Ireland Protocol, which will cause threat of litigation from Brussels.
Hey said that the termination of cooperation on financial services is “proof of the problems arising from the debacle over the Northern Ireland Protocol”. He added: “Resolving the Northern Ireland Protocol would unlock many things for the common good of all.”
The committee said the Memorandum of Understanding (MoU) on regulatory co-operation, promised by both sides but not yet signed, had been delayed due to difficulties in UK-EU relations.
The committee said the Memorandum of Understanding should be a priority for the government, including “political and diplomatic engagement with the EU on financial services”.
The report also found the absence of the EU equivalence decisions over financial services reflects the political decision of Brussels, which kept Britain “on higher standards than other countries”.
But with this political motivation in mind, the Lords Committee said it would be “unwise for the government to base its financial services strategy on a process it cannot control and which currently seems unlikely to bear fruit”.
The committee found that fewer financial services businesses were relocated to the EU as a result of Brexit than some feared. Estimates suggest that about 7,000 jobs have migrated, it says, with a warning of complacency “because it is not yet clear whether the impact of Brexit on jobs has fully taken place”.
The European Central Bank is conducting a “desk mapping” exercise, which is likely to result in the regulator requiring the relocation of more roles in financial services within the EU from London.
Separately Thursday, the selected Treasury Committee announced it was forming a subcommittee to examine proposed post-Brexit financial regulations in the UK, replacing the role previously played by the EU.
“There will be a huge amount of regulations that go down in the rules, so it is important that the parliament has control,” said MP Mel Stride, the chairman of the committee.
“There is a natural tension between safety and the correctness and regulation of lighting in order to improve our international competitiveness,” he added.
Stride also commented on the conclusions of the Lord’s report. “There has been a lot of talk for a long time about equivalence and how to put London on the EU market after Brexit. So far, it has borne little fruit, “he said.
“The consequences for Northern Ireland are just another thing that makes it difficult. But that is not the overarching cause of the problem. “