Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020

Lord Hain Excerpts

Thursday 18th June 2020 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, I thank the Minister for her agility in so seamlessly and cogently speaking to the correct regulations. She says that they are minor, but the real importance of these regulations is that they illustrate what is at risk if we fail to reach an adequate trade deal, as seems very possible. Surely the regulations cannot in themselves begin to replace the unfettered access to the single market for our financial services sector which EU membership provided.

As the Minister will know, this sector employs 2.2 million of our workforce and is estimated to account for 6.5% of the UK’s economic output, generating more than £70 billion in tax revenues in 2017, making up 11% of the national total. Until the financial crisis of 2008, the City of London was seen as the country’s greatest economic asset, as well as being by far the most important financial centre in the European Union. Financial firms in London have benefited hugely from EU membership, most obviously through passporting rights which enable firms to trade in any other member state, under the supervision of British regulators, without having to seek further authorisation from each country. Around 5,500 firms based in the UK currently benefit from passporting, with financial exports worth £26 billion, while 8,000 companies in the European Economic Area use this mechanism to offer services in Britain. After the post-Brexit transition period, UK financial services will lose their EU passport rights and be forced to rely on equivalence for their market access to Europe. Under that scheme, the European Commission decides whether a country’s regulations are deemed robust enough for it to operate within the single market, and can later withdraw the decision with as little as 30 days’ notice—so much for taking back control.

In the run-up to the last election, many financiers seemed to assume that a Conservative victory would ensure business as usual for the City. However, as these regulations show, Britain’s status as Europe’s leading hub for financial and legal services is at real risk after Brexit. Already, more than 300 firms in Britain have opened EU hubs in order to ensure single market access, while £1 trillion of City assets and 7,000 banking jobs have been transferred to the eurozone. London has been supplanted by New York as the world’s leading financial centre in the Global Financial Centres Index and is close to being overtaken by Hong Kong. Again, so much for the Brexit promise of taking back control, even with these regulations.