Chancellor sets out financial services roadmap for the post-Brexit era

By Joe Cooper

Chancellor Rishi Sunak today pledged his commitment to protect and strengthen the UK’s financial services sector as he mapped out his post-Brexit vision for regulation and competition.

In his first Mansion House speech to the City of London, Sunak outlined the Government’s vision of the UK’s financial services sector outside the European Union.

Noting of the refusal of the EU to agree to a comprehensive “equivalence” agreement that would recognise UK financial services rules, Sunak said that the Government plans to build on the UK’s regulatory regime, which he described as one of the “world’s most robust” systems. In terms of sketching out this vision, closer ties with the US and China were central features of the speech, while also cementing the UK’s status as a leader in fintech and innovation. A consultation on reform of stock market listing rules to attract more companies to the London Stock Exchange were also announced.

In line with the Government’s wider agenda in the build up to the COP26 climate summit in Glasgow, the Chancellor was keen to stress the UK’s green credentials. he His speech outlined plans to make the UK the “best place for green finance” through schemes such as the NS&I’s green savings bond – the first of its kind – along with the issuing of at least £15bn of green gilts in this financial year alone. The money raised through these schemes will support investment in projects such as wind and hydrogen, in line with the Prime Minister’s 10 Point Plan announced late last year.

The Chancellor also announced plans to require companies, pension schemes, financial services firm and their investment products to report on their climate and environmental impacts for the first time. The new Integrated Sustainability Disclosure Requirements combine existing climate requirements and go further to ensure greater levels of consumer and investor awareness of the environmental impact of businesses and investments. While the exact framework in which this system will be set out will be set in legislation later this year. If the Government’s various support schemes and incentives provide the carrot for hitting environmental targets, these new reporting requirements represent the stick for those who fail to meet their targets.

While the Government has faced criticism from the Committee on Climate Change - its own climate change advisory body – for its perceived lack of concrete action on reducing emissions, the mandating of reporting on climate targets and progress in reducing emissions represents another step in the right direction for delivering on its Net Zero targets.

Sunak’s speech also comes in a week where the future of the UK’s state aid regime has become clearer; the other area where the Government is keen to demonstrate how clear changes can be introduced outside the EU.

After a consultation period - which we covered earlier in the year – the Government issued its formal response on the new subsidy regime, with the new regime will be enshrined in legislation through the Subsidy Control Bill introduced to Parliament this week.

In line with another one of the Government’s key agendas, levelling up the UK’s regions, the Bill grants devolved governments the power to decide if they can issue subsidies by following a set of UK-wide principles. A fight with Cardiff and Edinburgh is likely, however, as devolved governments insist that they are being given less power than they ought to be. The Government hopes, however, that the new regime will support the retention of jobs and economic opportunities locally and avoid displacement to regions such as London and the South-East.

Expect to see further developments on the future of the UK’s financial services and subsidy regime in the weeks and months to come.