Brexit: David Frost on chances of financial services agreement

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The Brexit minister struck a downbeat tone on the chances of the EU granting equivalence to the UK. Financial services were largely left out of the free trade deal struck between London and Brussels last year.

The two sides holding talks on services, which make up the backbone of the UK’s economy, since January.

Last year the UK granted so-called equivalence to the EU on a number of areas, but Brussels has been accused of dragging its feet on granting reciprocal access to Britain

Equivalence would see the EU recognise the UK’s rules and regulations as similar enough to the bloc’s own that cross-border trade can be allowed to take place.

Lord Frost on Thursday night said No10 was losing hope in the EU granting the status to the UK, despite both territories being covered by largely the same financial regulations from when Britain was a member of the bloc.

He told the UK in a Changing Europe think tank: “We’re waiting to see what they do.

“I think it’s realistic to assume we’re probably not going to get equivalence in every area given what the atmospherics coming out of Brussels.”

He added: “Financial service equivalence is obviously it’s not one thing, it’s a set of potential equivalences and some of those are in place because they are systemically important to both parties.

“The UK has granted a particular pattern of equivalencies and we’re still waiting for the EU on some things.”

Financial services contributed £132billion to the economy in 2018, almost seven percent of Britain’s total economic output.

Last year the City of London exported £25billion of services to the EU.

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However, the bloc is understood to be demanding the UK agree to follow Brussels regulations as the price for access.

Lord Frost said there was a general consensus it would be a bad decision for the UK to surrender to such demands.

He said: “I think the City feels pretty confident about that.

“It generally believes that control of our own financial service rules, and the dynamism and the ability to experiment that comes with that, is going to be more important if it comes to it.”

Reflecting on the frictions in relations between the UK and EU since January, the Brexit minister said he was disappointed there had been so much “bickering” with the Commission.

“We genuinely didn’t want this. The vision is of a free trading, sovereign Britain that’s friendly with its neighbours.

“It seems to have been more difficult to get there than we thought and the history and the process of the last few years probably weighs a bit on that,” he said.

“It’s absolutely is not part of the plan to be bickering with the EU and I hope it isn’t part of their long term plan either.”

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