The negotiations between UK and EU officials are getting heated. The European Commission held a presentation on Tuesday, directed toward the 27 remaining EU countries, explaining the issues currently obstructing the discussions.
UK officials are adamant about restricting the free flow of European workers into UK territory. In perhaps a retaliatory effort, the EU is saying that UK banks will also endure limited access to the European Union’s single market, in the event that the UK does not become more lenient in its approach.
Financial Services Remain Focal Point
Despite the efforts by the UK to ensure full access to the EU market for financial institutions, current responses from the EU suggest that the more likely scenario will resemble the current restricted Canada model, which limits access to EU free trade agreements, and prevents ‘financial passports’ to UK institutions. In other words, UK financial institutions would not be permitted to openly and freely sell services in the EU market, or would alternatively have these activities restricted somewhat.
The UK is claiming that financial institutions should receive full access on the premise of equivalence, since they claim to enforce rules and restrictions that are in line with those of the EU. The European Commission noted that the conditions for UK financial services access would be pegged on three underlying factors, including Canada’s restricted free trade agreement model, some level of equivalence, and regulatory cooperation. The fact that the EU is not fully adhering to the equivalence factor is causing some backlash on behalf of UK officials.
Getting Their Ducks in a Row
In order for negotiations to move forward it is important that EU nations first reach a clear consensus regarding post-Brexit terms. As it currently stands, it appears that the EU’s largest economies, including Germany and France, are insisting on more stringent terms, while other countries have touted being more lenient.
As often reported by FortuneZ since the Brexit vote, many banks and financial institutions are taking precautionary measures to assure their continued operations in the post-Brexit EU. Some have already selected their planned landing spots, while others have already leased and occupied office space across the continent, in locations that include Frankfurt, Paris and Dublin, among others.
The terms of the post-Brexit agreement will likely fluctuate over the coming months. It is appearing more likely that the conditions for UK financial services offered across the EU will be at the forefront of talks until the deal is officially formalized.