Plans by Prime Minister Keir Starmer to forge closer economic ties with the European Union are facing significant resistance from the UK's financial heartland, with senior City executives demanding special exemptions for the sector.
City Leaders Warn Against Regulatory Uncertainty
The push for a new customs union, advocated by senior cabinet members including Justice Secretary David Lammy, is likely to exclude financial services after intense lobbying from the Square Mile. Key figures have called for explicit carve-outs in any future negotiations to preserve the UK's post-Brexit regulatory autonomy.
Steven Fine, chief executive of investment bank Peel Hunt, highlighted the progress made since leaving the EU, telling the Financial Times: "The UK has made substantial progress on financial services reform over the past few years... we have significantly less friction in our regulatory framework compared with most jurisdictions in Europe." He warned against "creating potential uncertainty just as the City is recovering its mojo."
London Adapts and Thrives Post-Brexit
Initial fears of a mass exodus of bankers and firms from London following the 2016 Brexit vote have largely subsided. Only a limited number of roles relocated to European hubs like Frankfurt and Amsterdam.
Instead, the sector has leveraged its newfound regulatory flexibility. A prime example is the abolition of the EU's bonus cap, allowing top banks to offer more competitive London pay packages. Furthermore, the government has supported Bank of England reforms to raise the MREL threshold—the minimum requirement for own funds and eligible liabilities—to between £25 billion and £40 billion, a move poised to unlock billions for lending and investment.
Risk to London's Financial Crown
Concerns persist that submitting to EU financial rules could allow Brussels to steer regulation in a direction detrimental to London's interests, potentially jeopardising its status as Europe's premier financial centre.
Mats Persson, macro strategy leader at EY-Parthenon, emphasised the competitive advantage of the UK's current approach, noting companies "are seeing the benefits of the UK’s ability to regulate in a nimble and innovative way, particularly in relation to emerging technology and access to global markets."
The clear message from the City is that any closer alignment with the EU must not come at the cost of the regulatory freedom it has gained since Brexit.
