What's behind the Brexit White Paper?

What's behind the Brexit White Paper?

The July release of  the UK Brexit White Paper, the blueprint for the UK's future relationship with the EU, thrashed out by the cabinet at Chequers, has been accompanied by a parliamentary rollercoaster of events, unprecedented in modern times.  

The two immediate cabinet resignations of Boris Johnson and David Davis, were followed by the Prime Minister accepting Brexiteer amendments to the Customs Bill on taxes, tariffs and VAT, which arguably could prevent aspects of the White Paper even being capable of negotiation.

As resignations poured in, including the pro-Remain minister for defence procurement, the Prime Minister then deflected a remainer rebellion to the Customs Bill, of combined pro-EU and Labour politicians, winning the vote by a whisker.

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With the White Paper’s themes having a rocky rideat home, reception on the continent has been underwhelming.

The EU’s chief negotiator, Michel Barnier, praised the White Paper for opening “the way to constructive discussion” and providing many usable elements, but questioned whether proposals were compatible with earlier EU stated principles; took swipes at proposals for regulatory alignment on manufactured goods, and knocked proposed customs arrangements.

He also noted that the UK services proposals could give the UK a “significant competitive advantage” which might not be in the EU’s “best interests”.

So with most of the potential Brexit outcomes still possible, and the White Paper affirming the “nothing is agreed until everything is agreed” negotiating principle, what are the White Paper principles relevant to the City? And what do they mean for UK financial services and the City? 

What are the proposals for UK-based financial institutions to access the EU?

Maintaining existing passporting rights was the City’s dream Brexit outcome.

Increasingly, it seemed unlikely, and the White Paper eliminates this hope, stating that: “the UK can no longer operate under the EU’s “passporting” regime, as this is intrinsic to the Single Market of which it will no longer be a member.” 


Absent passporting, the consensus view was that Third Country Regime (TCR) access provisions were the most practicable alternative.

TCRs are established under EU rules covering third country established firms. 

Under existing EU law, TCRs provide rights of access below passporting for financial services, such as conducting certain regulated activities, providing wholesale investment or portfolio management services; or fund management services, without further authorisation requirements from an EU member state.

The US and Canada both hold TCR status. The White Paper proposes an arrangement worse than passporting, but better than TCR. Let’s call it TCR-plus.  

Noting that the UK’s dominant position – 30 global systemically important banks based in London, with four selecting the UK as home. 

The White Paper concludes that a TCR would not be workable for the UK’s financial markets due to deep UK/EU interconnectivity.

This would be compounded by a lack of institutional dialogue arrangements between regulators, the absence of systems to maintain compatible rules, and insufficient reciprocal supervision co-operation mechanisms.