In the Prime Minister's Mansion House speech on Friday, the Prime Minister hinted at the UK's desired Brexit outcome for financial services: a "collaborative, objective framework". Whilst relatively light on the details of what this might mean in practice, the references to the framework being "reciprocal" and "permanent" are interesting in suggesting that the UK may likely seek some type of formal access mechanism potentially beyond that which currently exists for pure "third countries" outside the EU/EEA.
At present financial services firms in third countries must rely on limited access rights such as the third country passporting regime under MiFID II; equivalence concepts under the Alternative Investment Fund Managers Directive; and private fund placement regimes within individual European Member States.
These comments were echoed during the Prime Minister's interview on The Andrew Marr Show on Sunday, in which the Prime Minister suggested that retaining existing passporting rights would require the UK to become a "rule taker" but that a free trade deal could encompass financial services and go further than provisions in existing free trade agreements, such as those with the USA and Canada.
It will be very interesting to see whether the Government provides more detail on its thinking in this area over the coming days and weeks and whether this heralds discussion of a possible "middle way" between full single market access on the one hand and third country status on the other.
As in other areas of the future economic partnership, our goal should be to establish the ability to access each others’ markets, based on the UK and EU maintaining the same regulatory outcomes over time, with a mechanism for determining proportionate consequences where they are not maintained. But given the highly regulated nature of financial services, and our shared desire to manage financial stability risks, we would need a collaborative, objective framework that is reciprocal, mutually agreed, and permanent and therefore reliable for businesses.