City of London boost after Australia’s PM urged EU not to punish UK’s financial sector

Australia trade deal ‘won’t be a lowering in standards’ says expert

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Lord David Frost said the City of London needs to “get on and do its own thing” after Brexit, as he suggested equivalence might be unlikely. The Brexit minister also told a House of Lords committee that Brussels will continue to take decisions on equivalence that are “in their interest”. UK financial firms lost their wide ranging access to EU markets when the Brexit transition period came to an end on December 31 and now have to navigate a patchwork of regulations from member states.

The only way the City of London can regain its pre-Brexit access to the EU is if Brussels unilaterally grants regulatory equivalence.

However, the bloc believes the UK is destined to diverge from its financial services regulations and has withheld the designation.

John Garvey, global head of financial services at PwC, told the Telegraph that although he doesn’t expect a deal imminently, there will come a point when Brussels realises a deal is in its own interests.

In 2016, Australian Prime Minister Scott Morrison, who at the time was serving as Treasurer, urged the EU not to punish the UK’s financial sector over Brexit.

Mr Morrison used a speech to G20 colleagues in Germany to call for collective support as the UK was about to leave the EU.

Mr Morrison told the conference: “Australia will continue to support and promote global free trade.

“We must recognise that a punitive or restrictive set of new arrangements will have far greater and more lasting implications than the immediate reaction to the poll result itself.

“Any reduction in financial system efficiency and liquidity within and between the EU and UK would have implications well beyond Europe.”

Mr Morrison said the UK had developed into a major trading hub for euro-denominated transactions and restricting the location of euro transactions could impose additional risks and costs for EU and global market participants.

He insisted: “We must all encourage the relevant parties to explore how the market can continue to operate efficiently and how the UK can continue to support that outcome.

“Negotiators have to recognise the mutual benefits that come from co-operative and open financial arrangements and that the UK will continue to play an important role in the EU financial system.”

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The UK Government is now locked in a “ferocious” internal battle over whether to sign off a trade deal with Australia, after a split between the department of agriculture and the department of international trade over the terms of the agreement.

George Eustice, the Environment Secretary, is fighting to extend a transition period – during which tariffs would gradually reduce to zero – from 10 to 15 years in order to shield British farmers and give them more time to adjust.

However, allies of Liz Truss, the International Trade Secretary, believe that a failure to agree terms could scupper future deals with the US and other major economies, in turn squandering the opportunities of Brexit.

Ms Truss is backed by Lord Frost, as well as Kwasi Kwarteng, the Business Secretary, who warned that a failure to strike an agreement with Australia would make other deals “very challenging.”

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According to Ms Truss, financial services could be the real winner in a deal with Canberra.

In her only newspaper interview during a two-day Australian visit in 2019, Ms Truss said liberalising services was a top priority, along with making it easier for Britons and Australians to work in each other’s countries.

Ms Truss said she “definitely” expected more British banks, insurers and other financial services companies to open in Australia, and she also expected greater opportunities for Australian investors to invest in UK infrastructure.

She said: “The City of London leads the world in financial services and leaving the EU regulatory straitjacket is going to give us an opportunity to be more active around the world, and I think Australia is a fantastic market.”

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