Britain’s financial services firms are on the verge of clarifying the regime that would govern the EU’s financial sector activities. The EU-UK Trade and Cooperation Agreement (TCA) focuses on agreeing on the memorandum of understanding regarding financial services by the end of March 2021.
The UK has released equivalence for EEA financial services companies to operate in several UK sectors, including credit ratings and derivative trading.
In contrast, the EU has shown less generosity in its equivalence decisions, positioning the UK as a competitor in the financial services field. The EU also calls an 18-months equivalence decision for UK-based clearing houses to finish their derivatives clearing.
UK business can thrive in EU states by using subsidiaries or domestic corporate entities, requiring them to comply with the state’s regulator requirements.
The UK aims to reach general trade agreements in other major economies such as Southeast Asia, China, and the US by actively negotiating bilateral services agreements, specifically in the financial sector.
The UK Foreign Secretary has met the ASEAN Secretary-General at the ASEAN Secretariat in early April 2021. The visit seeks to forge closer trade and security ties with Indonesia and Brunei Darussalam, further discussing future cooperation on post-pandemic economic recovery.
The focus on Southeast Asia is a part of the Global Britain agenda, making Indo-Pacific tilt an integral part of the country’s financial services presence outside of the EU.
Southeast Asia is deemed to offer abundant opportunities to advance the UK’s effort in reinventing itself post-Brexit, providing reliable and contributive actions in the development of the developing ASEAN members.
The UK has invested over USD 132.5 million through the Newton Fund to support ASEAN states’ international science and innovation collaborations.
The UK’s newly launched Office for Investment will also be responsible for all foreign investment activities involving the country as both the recipient and the investor. The office plans to conduct a national security screening for 5G developments done by the country’s two major technology providers–America and China.
The screening would determine national security implications from the transactions, further examining potential opportunities and threats that might impact the market’s competition.
There are still some concerns about how the UK will retain its reputation as the financial center as Brexit reaches its final stage. Around 40 percent of the UK financial services sector’s trades are reliant on the EU at the moment.
Still, the numbers will most likely go down after the TCA launches, creating an immediate impact on the country’s financial sector.
The UK will need to forge strong business ties with Asia and the US to maintain London as the dominant global financial hub. 2021 and 2022 will be crucial in determining how the country renews its focus on international opportunities, taking leverage on Asia’s attractive emerging market and the US’s investment-friendly administrative regimes.