Chancellor Philip Hammond has told European leaders it is in the interest of both the UK and the European Union to include financial services in a post-Brexit free trade agreement. His speech offered some clarity on the direction the government hopes to take financial services once the UK has left the EU.

According to the BBC, the Chancellor of the Exchequer said: “I am clear not only that it is possible to include financial services within a trade deal, but that it is very much in our mutual interest to do so.”

However, the report said President of the European Council Donald Tusk rejected the proposals. Tusk said a trade deal including financial services “does not exist”, according to the report.

Hammond added it did not surprise him that the “EU had set out a tough position”.

As it stands, the UK has until the end of March 2019 to come to a formal agreement on the terms of Brexit.

Cavendish Asset Management fund manager Paul Mumford backed Hammond’s stance.

“The Chancellor is obviously right to say that the City needs to retain strong ties to the European market, and at the end of the day Europe needs the City too,” he said.

“Whatever the final arrangement, it’s difficult to imagine them not reaching some sort of special agreement concerning financial services at least.”

Investment Association chief executive Chris Cummings said: “The IA agrees with the Chancellor that any free trade agreement between the UK and the EU should be based on the concept of mutual recognition, rather than the current equivalence assessment.

“Maintaining market access in this way would be the most beneficial outcome for UK and EU savers alike.”

Association of British Insurers director general Huw Evans said: “It would defy common sense not to have a Brexit deal on financial services so we welcome the Chancellor’s commitment today.

“It’s now time for everyone to drop the dogma and get round the table. The insurance and long-term savings sector is already well integrated and our regulations are aligned so if the will is there, a deal that works for everyone can be done.”

He added: “Insurers across the EU and in the UK must have legal certainty they can pay their customers and it is vital we maintain the flow of skilled labour between the UK and EU that will keep the UK a world leader.”

FCA Backing

The Financial Conduct Authority (FCA) revealed last July it had taken on extra staff to cope with the additional workload Brexit has delivered.

At the time, FCA chief Andrew Bailey said it was “critical” the financial watchdog remained internationally engaged, echoing sentiments he expressed earlier, where he argued there would be a need for “strong co-ordination” of regulatory institutions between the UK and EU.

This is reproduced from Professional Adviser; all views are from the publication. This originally appeared online on 7 March 2018.

Further reading on this topic:

EU warns UK asset managers of Brexit ‘legal repercussions’