The Association of British Insurers and other players in Britain’s financial industry slammed U.K. Prime Minister Theresa May’s latest proposal for Brexit, with some calling it the worst outcome possible.
In some of their most forthright comments since the referendum vote in 2016, industry executives said Thursday that her plan for a looser partnership with the European Union in financial services would drive up costs and hurt the wider economy. They also said it would leave the country losing easy access to its biggest market while also being at the mercy of the EU’s rules.
May is now leaning toward an agreement for the U.K. that will be similar to so-called equivalence — existing arrangements the bloc has with other countries, based on maintaining similar regulations, according to the long-awaited White Paper on Brexit. As a result, U.K.-based insurers and banks would lose their unhindered access to EU markets, and much of their current influence over EU business rules.
“Having to comply with financial regulations we have no say over would be the worst possible scenario for our world-leading insurance sector, so we will look to the government to negotiate a better outcome than this,” said Huw Evans, the director general of the Association of British Insurers. “Whatever the final outcome, the insurance industry is too important to be a rule taker.”
“Today’s Brexit White Paper is a real blow,” Catherine McGuinness, the policy chairman for the City of London Corporation, which manages the British capital’s financial district, said in a statement. “With looser trade ties to Europe, the financial and related professional services sector will be less able to create jobs, generate tax and support growth.”
McGuinness said equivalence isn’t good enough and would need to be substantially enhanced. A key sticking point in the current equivalence setup is a potential worst-case scenario for the U.K.: the EU’s ability to unilaterally pull out of such an arrangement at short notice, undermining long-term planning for businesses.
Chancellor of the Exchequer Philip Hammond defended May’s plan late Thursday, saying it “can deliver a good deal” for the U.K. and its financial industry. He’s been one of the staunchest defenders in May’s cabinet of maintaining close ties with the EU after Brexit.
“Britain’s successful service sector — and our world-beating financial services industry in particular — has always been at the heart of our plan,” he wrote in an op-ed for the Financial Times. “I am resolute that we have to secure a deal that allows the sector to continue to flourish.”
Britain wants to expand the range of banking services covered by equivalence and have more input on the future shape of EU regulations. Indeed, the U.K. will have advantages over other countries while formulating a new arrangement with the EU, Hammond wrote. Both sides already have the same regulatory frameworks and stand to benefit from preserving financial-services relationships.