The European Union (EU) summit at the end of June was widely touted as a crunch moment for Prime Minister Theresa May, with some hope for breaking the political deadlock on Brexit.
However, migration dominated the agenda and while European leaders thrashed out the existential fate of the EU, Brexit headlines were relegated to second place (somewhat conveniently, some may argue).
Attention has now shifted back to the wrangling within the prime minister’s cabinet. Despite the newly returned collective ministerial responsibility and an overarching negotiating path for trade in goods with the EU, we are still no clearer about the fate of one of the UK’s most important industries.
With nine months remaining until the UK leaves the EU, the investment management industry clearly has a vested interest in the process and it is vital that the legal and regulatory consequences of the negotiations do not hamper the ability of the investment profession to serve the best interests of investors, or indeed hamper companies’ ability to hire and retain talent.
In recent weeks, a clear difference of opinion has emerged between EU and UK financial regulators, with the European Banking Authority (EBA) stressing that the agreed transition period does not provide any legal certainty until the withdrawal agreement is ratified, and the Bank of England (BoE) criticising the EU27 for not doing enough to ensure financial stability in the case of a no-deal scenario.
However, the latter has reiterated that the UK will deliver on its promise to bring forward legislation for a temporary permissions regime to allow relevant firms to continue their activities in the UK after Brexit.
The Treasury has set out the UK government’s approach to financial services legislation, announcing that they will be converting the existing EU acquis, or body of legislation, into UK law to ensure that a functioning legislative framework for financial services is in place even in the event of a hard Brexit.
Finally, Phillip Hammond, UK chancellor, argued that the existing system of EU equivalence arrangements does not provide the stability that a well-regulated market requires, while Bank of England governor Mark Carney called for the future EU-UK financial services relationship to be based on equivalent outcomes and supervisory co-operation.
So, while negotiations between the EU and the UK continue until the next summit in October, financial services remains one of the most exposed aspects of Brexit and risks being relegated until the very end.
Inextricably linked to all of this is ensuring that the brightest and best individuals do not remain an after-thought in terms of talent acquisition and retention. This is a particularly acute consideration for the City.
UK government statistics show that the financial services sector represents 6.5 per cent of the UK’s economic output, and it employs one in every 30 people in the UK. The sector was the eighth largest in the OECD in 2016 by its proportion of national economic output.