Ex-Cabinet secretary ‘more optimistic’ about UK financial services post-Brexit

A former Cabinet secretary has expressed increased optimism about the future of the UK’s financial services industry post-Brexit.
Lord Butler of Brockwell said a Lords European Union committee report in December warning of the need for an adequate transition period to avoid a “cliff edge” was “perhaps too pessimistic”.
The report was correct in underlining the importance of financial services to the UK economy and the “unreliability” of the passporting regimes which enable UK firms to provide services to the rest of the EU.
But the independent crossbencher said he had become “more optimistic” because the report was “UK focused” and when the needs of EU businesses were taken into account “more grounds for optimism emerge”.
Lord Butler, a member of the financial affairs subcommittee which conducted the inquiry, said a transitional period was better than a cliff edge but a rapid agreement respecting the mutual interests of both sides was better still.
Britain’s EU partners had an interest in not using the passporting arrangements in a “vindictive manner”.
Lord Butler said he did not go along with those claiming that Brexit would enable London to become more attractive to world-wide business by tearing up parts of the EU regulatory regime.
“It will still be necessary for the UK to retain harmony with EU regulations,” he told peers.
“But it does mean we will have a mutual interest in keeping close to each other.”
Brexit negotiations must take account of the “mutual interests of both sides” and not be “driven by ideology”.
Opening debate on the report, subcommittee chairwoman Baroness Falkner of Margravine said the UK was the world’s leading exporter of financial services, employing 1.1 million people and accounting for around 7% of GDP.
The implications of Brexit were “potentially enormous,” the Liberal Democrat peer warned.
If London was to lose its role as the world’s number one financial centre, subcommittee members were not convinced that another EU location could “step up and provide the services as effectively and efficiently as the UK currently does”.
Lady Falkner said if the economic argument trumped the political one, the EU “should be willing to do a deal” as the potential costs to the UK and the EU economies “could be very high”.
Independent crossbencher Lord Dykes warned of a “long, painful and bumpy road” ahead and said “the second-thought syndrome is becoming increasingly powerful”.
For the Opposition, Lord Tunnicliffe said the report confirmed his suspicions that at present the Government was not sufficiently prepared for the “monumental task of extracting ourselves from the EU”.
Lord Tunnicliffe said he did not doubt ministers’ determination in wanting to maintain a strong and vibrant financial services sector. “However, I do doubt whether they have the strategy to achieve this.
“I fear that instead of a clear plan the Government is clinging on to the notion that our position as a global leader in financial services is unshakeable.”
Treasury minister Baroness Neville-Rolfe said the Government was aiming for the freest possible trade in financial services between the UK and the EU through a new strategic partnership.
She said ministers were seeking to understand the needs of a wide spectrum of financial service providers and promised consultations would continue throughout the negotiation process.
Lady Neville-Rolfe said ministers wanted the change to be as smooth and orderly as possible, with a phased process of implementation.
The UK and the EU had a mutual interest in ensuring that specialist activities, such as clearing, did not end up in New York, she said.

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