17 February 2021

FT: Brussels is fighting to make the EU more competitive in financial services Robert Shrimsley

Sometimes casual phrases reveal. So it is with the talk of a “hotline” between a senior British minister and an EU commissioner to de-escalate flare-ups around Northern Ireland. The truth is more prosaic; they have each other’s mobile numbers. But for all the bonhomie between Michael Gove and Maros Sefcovic, the cold-war terminology highlights the reality of increasingly antagonistic relations between London and Brussels.

Yet the analogy also deceives because this is not a face-off between two similarly matched powers. Brexit has created a powerful commercial rival on the UK’s doorstep and Leavers should remember their own depiction of Brussels, not only as hopelessly bureaucratic but also as a bullying giant set on protecting its own power. The shambles of the EU’s vaccine programme perfectly illustrated the first point. The furious and panicked response, including threats of checks on the Irish border, highlighted the second. Brussels does not feel the need to fight fair when it deems its own interests are at stake.

Nowhere is this now more apparent than in the EU’s refusal to grant regulatory equivalence to the UK’s financial services industry. In recent days, British ministers have seen Brussels is serious about chipping away at London’s status as the region’s financial centre. Amsterdam’s largely symbolic ascent to top spot in European share dealing and the City’s loss of swaps business, albeit mainly to New York, has persuaded the EU of the merits of delaying any stabilising arrangement while other business can be captured.

Ministers expected the EU to claim some wins but believed London’s deep wells of liquidity would shield it from the worst damage. But this outlook is based partly on expectations of an equivalence agreement that they argue there is no justification to deny to the UK. Britain even unilaterally granted a number of such arrangements in November while holding back others in anticipation of a reciprocal deal.

Suddenly, ministers are downbeat. The prospects for equivalence “look bad”, says one. A memorandum of understanding on future collaboration looks set to be “very modest”. One Conservative describes a conversation with a very senior banker: “He says European Central Bank supervisors are going desk to desk looking for areas which could be within the EU’s orbit.” “The EU is on a land-grab,” says Sam Lowe, of the Centre for European Reform. “It is pursuing a strategy designed to try to lever over as much economic activity as possible and being quite blatant about it.” Some equivalence may still come “but it is now down to what is in the EU’s interests”....

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