The Financial Times reports that Michel Barnier, European Chief Negotiator for the UK Exiting the European Union, has rejected the UK’s proposals on how financial services may access the European market after Brexit, saying that the proposals would jeopardise the EU's “decision making autonomy”. This runs counter to the assertion of the UK government in its white paper, detailing a proposal for "a new economic and regulatory arrangement with the EU in financial services…based on the principle of autonomy for each party over decisions regarding to access to its market."

The government proposed that the starting point should be reciprocal recognition of equivalence with all existing third country regimes in effect at the end of the implementation period. However, knowing the inherent limitations that this presents, the government suggested that the existing frameworks for equivalence would need to be expanded: "A new arrangement would need to encompass a broader range of cross-border activities that reflect the global business models and the high degree of economic integration. The UK recognises, however, that this arrangement cannot replicate the EU's passporting regime." The government stressed that equivalence decisions will be an autonomous matter for each party, but suggested agreed common objectives, a reciprocal commitment to supervisory co-operation and regulatory dialogue, and the enhancement of equivalence procedures to provide, for example, a structured withdrawal process for when either party wishes to end equivalence and a presumption against unilateral changes that narrow the terms of existing market access regimes. Some of these proposals are likely driven by the fact that current equivalency arrangements can be withdrawn immediately at the initiative of the European Commission. However, the EU is alert to this and challenging negotiations look likely to continue.

In the meantime, financial services firms remain in limbo and must continue to prepare for a hard Brexit in March.