LONDON (Reuters) – A trade deal between Britain and the European Union would help open the door to cross-border financial services from January and avoid years of acrimony, industry officials said on Monday.
Financial services are not part of talks that continue this week in a bid to conclude a free trade agreement (FTA) before Britain’s access to the bloc under transition arrangements ends next month.
“It’s very important for the financial services industry that there is a deal, it will completely change the atmosphere,” Nicolas Mackel, CEO of Luxembourg for Finance, told an online event.
“If there were to be no deal, relations would be acrimonious for at least one or two years, and it would be very difficult to envisage any bridges to be built across the Channel,” he said.
Any FTA is expected to include a commitment to create a forum for regulators in Britain and the EU to meet regularly, which the financial sector sees as crucial to avoiding clashes that would slam shut the door to cross-border access.
Having such a “structured regulatory dialogue” would provide a good base to build on, said Chris Cummings, chief executive of the Investment Association, a trade body for fund managers.
“The worst thing in the world would be no political agreement, no regulatory agreement and hard barriers,” Cummings said.
Compared with other parts of the financial sector, the funds industry has emerged relatively unscathed from Brexit, with the EU allowing asset managers in Britain to continue picking stocks for funds based in the bloc from January.
Sheila Nicoll, head of public policy at asset manager Schroders, said it would take time to rebuild trust between British and EU financial regulators if there was no FTA.
Asset managers were already concerned about stock markets fragmenting in Europe because Brussels has yet to allow cross-border share trading from January, she said.
“You don’t want to cut off liquidity for political reasons,” Nicoll said.
Reporting by Huw Jones; Editing by Alex Richardson