A Memorandum of Understanding on financial services agreed between the EU and the UK, published on 19 May, could elevate the tone of the discussions and lead to a more productive relationship. It could offer as great a benefit to Luxembourg as it could to the UK and all of Europe. It could also start to undo some of the damage done to the relationship in the immediate post-Brexit years, restoring trust between neighbouring markets with a nearly 50-year shared history.
This goes far beyond setting up a simple “talking shop” that critics have called the agreement.
“I think it’s a very encouraging confirmation that the relations between the EU and the UK are warming up,” said Nicolas Mackel, the CEO of Luxembourg for Finance, the public-private Luxembourg agency for the development of the financial sector.
Ending suspicion
“If you look at what happened in the financial industry, since the vote in 2016, we really see a clear lack of trust, it’s probably even more than in any other sector – the EU looking at the UK with a lot of suspicion,” said Mackel. “That’s exactly what I think that this forum, if it is used constructively and well, can address and even redress.”
For Mackel, the agreement when signed will provide a forum where the people in charge of each political entity’s regulatory policy or legislative drafting will be able to talk about what they are doing and what they are planning to do.
“We welcome the adoption of the Memorandum of Understanding on Regulatory Cooperation in Financial Services,” said a representative of the UK Embassy in Luxembourg to Investment Officer. “Signing the MoU is not the end of a process but a beginning: it will smooth the pathway to a mutually beneficial relationship between the UK and Europe in financial services.”
Deeply interconnected
“Building a constructive relationship appropriate to the scale and nature of our financial services sectors is of mutual benefit. As Luxembourg and the UK’s financial markets are deeply interconnected, we will continue to closely engage with Luxembourg on a bilateral level both with public and private sector stakeholders.”
Mackel recalled the fractious relationship of the immediate post-Brexit period, which led Europe to see the UK as “these buccaneers trying to turn London into Singapore-on-Thames.”
He pointed to the UK’s “Edinburgh Reforms”, a package of regulatory and tax announcements issued by the UK Chancellor on 9 December 2022 as indicating a change in the UK government’s priorities. According to the UK government. These take forward “the government’s ambition for the UK to be the world’s most innovative and competitive global financial centre.
Sunak’s vision
It is said to build on the UK government’s “vision for financial services, set out in 2021, “for an open, sustainable, and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens, creating jobs, supporting businesses, and powering growth across all four nations of the UK.”
The whole value of the MoU, said Mackel, lies in making the exchanges possible. “’We are planning to review MiFID, this is what we plan to do. What do you think of it?’”, Mackels enacted a possible exchange made enabled by this agreement.
Mackel addressed an apparent change of approach at the highest levels. “in my opinion, after the disasters of the last couple of British Prime Ministers. Rishi Sunak comes across as somebody who’s not only more of an adult, in terms of managing the country, somebody who has the needs of the British economy, and of business, in particular, more at heart.”
More constructive
Mackel continued to say that “[Sunak] certainly understood that, if Britain wants anything that is needed for its business, it also needs to give. It needs to step away from expedient sound bites, to being more constructive in its relationship with the EU.”
“I was saddened by the level of irresponsibility of politicians in the UK prior to Mr Sunak,” said Mackel. “That goes back years, because all of that has contributed to the disaster and then implemented the disaster in an even more disastrous way.”