The breakdown of UK and EU regulatory cooperation on financial services has become “collateral damage” in the Northern Ireland deal dispute, according to peers.
A House of Lords committee is looking at how Brexit The ongoing blow to the City of London raised concerns on Thursday over the lack of a working framework for UK-EU cooperation.
It found the UK government was reluctant to engage with Brussels and urged both sides to discuss financial services at a political level.
The chairman of the committee, also known as Lord Kinnoull, told the FT that efforts to secure financial services firms post-Brexit had been “significantly affected by the ongoing dispute over Northern Ireland’s trade arrangements as collateral damage”. “.
British ministers are planning to introduce a law that would drop parts of the Brexit deal over the Northern Ireland deal, sparking Threat of legal action from Brussels.
Hay said the breakdown in financial services cooperation was “evidence of the problems created by the collapse of the Northern Ireland agreement”. He added: “Resolving the Northern Ireland deal will unlock a lot of things that will benefit everyone.”
The commission said the Memorandum of Understanding (MoU) on regulatory cooperation, which the two sides had promised but not signed, was on hold due to difficulties in UK-EU relations.
The committee said the MoU should be a priority for the government alongside other “political and diplomatic engagement with the EU on financial services”.
The report also found that the absence of the EU Equivalence decision The financial services issue reflects a political decision in Brussels that requires the UK to “hold to a higher standard than other countries”.
But given this political motivation, the House of Lords committee said “it would be unwise for the government to base its financial services strategy on a process it has no control over and which currently seems unlikely to bear fruit”.
Fewer financial services jobs are moving to the EU because of Brexit than some feared, the committee found. Some 7,000 jobs were estimated to have moved, while warning against complacency “as it is not yet clear whether the impact of Brexit on employment has been fully realized”.
The European Central Bank is engaged in a “desk-mapping” exercise that could lead regulators to demand that more financial services roles move from London to within the EU.
On Thursday, the Treasury’s select committee announced it would set up a subcommittee to review Britain’s proposed post-Brexit financial regulations to replace the role previously played by the European Union.
Council chairman Mel Stride MP said there would be “a huge amount of regulation layered into the rulebook so parliament has to review it”.
“There is a natural tension between safety and soundness and deregulation in order to improve our international competitiveness,” he added.
Stride also commented on the conclusions of the House of Lords report. “There has been a lot of talk for a long time about equivalence and how to include London in the EU market post-Brexit. So far, it has had little result,” he said.
“The impact on Northern Ireland is just another thing that makes things more difficult. But it’s not the primary cause of the problem.”