The City of London’s top official is calling for closer co – operation between the UK and the EU

The City of London’s top official has called on the UK and the EU to sign a regulatory co-operation agreement on financial services, as she warned UK companies that hopes of ambitious market access arrangements for the bloc had been shattered.

Catherine McGuinness, chair of the City of London Corporation’s policy and resources committee, told the Financial Times it was important for Britain and the EU to finalize a memorandum of understanding on regulatory co-operation.

As the top political decision-maker at Square Miles’ local authority, McGuinness also called on the British government to allow more overseas workers to come to the city and expressed concern that its “leveling up” agenda to increase abandoned areas could harm the British capital.

Boris Johnson admitted at the time Britain and the EU concluded their post-Brexit trade agreement in late 2020 that it did not live up to what he wanted for UK financial services.

British companies were hoping to ensure a high level of market access through the EU, assessing that UK regulation of the industry was in line with rules applied in the bloc, but Brussels has largely refused to continue on this basis due to strained post- Brexit relations between the two sides.

The EU and the UK have also not signed a memorandum of understanding on a “financial regulatory forum” to discuss sectoral regulation, which the two sides agreed in principle last year.

McGuinness, who is coming to the end of his five years as chairman of the Square Miles policy and resources committee next month, called on Britain and the EU to put the memorandum in place.

“What’s really important is that we keep talking, we keep working together,” she said. “We would love to see us formally activate the co-operation scheme for regulators.”

Since Brexit, Brussels has made only one decision, stating that UK regulation is in line with EU rules, in a move that means the bloc’s banks can continue to use UK clearing houses until 2025.

British financial services companies were hoping for similar equivalence rulings from Brussels covering other areas of activity, but no one has been present amid tensions between the two sides, particularly over Northern Ireland’s trade links after Brexit.

McGuinness urged the city to move forward, saying “equivalence is a ship that has sailed”.

But she also said that Brexit was no longer an “existential threat” to the city, adding: “Of course we have lost business. Of course, it still causes ongoing problems for companies as they navigate exactly how to structure their companies.

“But fewer jobs have moved than we originally predicted [and] “We are hopefully moving through the worst of the tense relations we had with our EU partners, and I hope we can begin to move on to a more positive foothold with them individually and collectively.”

John Glen, economic secretary to the finance and city minister, on Tuesday endorsed estimates from the auditing firm EY that around 7,000 jobs have moved from Square Mile to the EU since Brexit.

The original EY estimates had set the job migration much higher: by 12,500 in 2016, at the time of the Brexit vote.

Meanwhile, McGuinness said the government had to look at immigration given the need for skilled labor in the city as rival overseas financial centers struggled to take business away from Britain.

“I think we need to look really carefully at ensuring that our companies continue to have access to the best international as well as domestic talent and ensure that our immigration system allows it,” she added.

McGuinness also warned the government not to forget London when considering policies to raise the bar in other parts of the country.

She said there was a “very real risk” that the British capital would be overlooked by ministers. “I really remind them that cutting back on London does not automatically benefit the rest of the country. It can damage it. “

The city is working through the aftermath of the coronavirus pandemic, which forced many businesses on the Square Mile to send workers home during lockdowns and again hit small businesses like pubs and shops that rely on commuters.

McGuinness said local businesses need to adapt to changing circumstances as many employees in the financial and professional service industry engaged in hybrid work and spent two or three days a week in the office.

“It is too early to say what the long-term work pattern will be,” she added. “I suppose this will leave us with a different pattern. If you only have 80 percent of the population coming in, it’s a change in the demand pattern. Businesses will have to adapt.”

But McGuinness highlighted new planning applications submitted by developers of urban buildings, which she suggested indicated that demand remained strong for offices in the Square Mile.

“Everyone is committed to their central office space, but they may be planning to use it in a different way,” she said.

“We need to make sure we provide the right kind of office space. People tell us they have different requirements, more collaboration, space, more flexibility and more and more access to the outdoors.”

Chris Hayward, vice chairman of the policy and resources committee, is seen as the most likely successor to McGuinness.

She said her tenure had largely been about “building or rebuilding relations in the wake of the Brexit vote and looking at the new kind of relationship with the rest of the world”.

Further reporting by Philip Stafford in London

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