0:00
Karmama's plan to foster closer economic
0:03
ties with the European Union is likely
0:04
to exclude financial services after
0:07
senior city figures pushed back against
0:09
reintroduction of EU regulations. The
0:12
prime minister has called for closer
0:13
ties with the EU in a bid to boost
0:15
economic growth with senior cabinet
0:17
members including Justice Secretary
0:19
David Lammy muting a proposal for a
0:22
customs union. But senior city figures
0:25
have expressed concern about the move.
0:27
The city's relationship with the
0:28
European Union has been hot and cold
0:30
over the years. In the years before
0:32
Brexit, there was a lot of
0:33
euroskeepicism in the city with
0:35
frustration over EU imposed rules and
0:38
regulations that made it harder to do
0:40
business in the UK. However, that
0:42
skepticism didn't always translate into
0:44
outright support to leave the European
0:45
Union with the majority of the city
0:47
deciding that the advantages of being
0:49
inside Europe's single market in which
0:51
financial services firms could trade
0:53
freely in other countries and move staff
0:55
around outweigh the disadvantages of all
0:57
the extra red tape. But 10 years on from
0:59
Brexit, things have changed and many in
1:02
the city are keen not to reopen the UK's
1:04
trading relationship with the EU as
1:06
Karma appears to be suggesting he will.
1:08
There are a few different reasons for
1:10
this. The first is uncertainty. Markets
1:13
always hate uncertainty because it makes
1:15
it hard to make investment and strategic
1:17
decisions for the future. In much the
1:19
same way that businesses didn't like the
1:21
uncertainty of Brexit in 2016, now they
1:24
don't like the uncertainty of another
1:26
change in our relationship with the EU
1:28
in 2026. The second is regulatory
1:31
independence. The UK has slowly begun to
1:33
take advantage of the greater regulatory
1:36
flexibility afforded by Brexit, which
1:38
means that London firms have more
1:40
financial freedoms than those on the
1:42
continent. This includes things like the
1:43
EU's bonus cap, which restricts bankers
1:45
pay and is no longer applicable in the
1:48
UK, as well as the possibility of a
1:50
divergence in what are called capital
1:52
requirements rules, which means banks
1:54
can invest more of their capital into
1:56
the UK compared to the rest of Europe.
1:58
If London rejoins the EU's regulatory
2:01
orbit, that means some of those extra
2:02
flexibilities could disappear. The city
2:05
will therefore be keeping a close eye on
2:08
any future negotiations when Kistoma
2:11
next heads to Brussels.
