Britain and the EU must work together to unite capital markets

A Brexit deal which pursues further capital market unity between the UK and the European Union (EU) would be better for both sides than going it alone, according to new research.

The Financial Service Negotiation Forum (FSNForum), chaired by Nasdaq director Anthony Belchambers, concluded that the EU should allow the UK smooth and easy access to its markets.

The most likely alternative would be competition, it added, which could leave the UK open to the threat of a less prescriptively regulated New York.

“The London markets are, and will continue to be, major pan-European assets. The case for EU recognition is both sensible and inevitable,” said Belchambers.

The report found that the liquidity of EU financial markets, or their ability to allow assets to be traded easily, is decreasing due to increased costs and onerous regulatory requirements.

This is posing a risk to the markets' capacity to meet the borrowing requirements of corporates and governments, which in turn could stunt growth in both the EU and the UK.

But the current UK government has a clear policy to grow its own financial services industry, the report notes, which could make the country invaluable to the EU.

“Europe as a whole desperately needs London’s rich, complex and abundant markets, networks and ancillary services,” said Daniel Hodson, chairman of FSNForum's executive committee.

The UK should not be expected to be granted access without making it own concessions, the report added.

It should simplify the procedures to allow international and EU firms to establish in the UK, reduce the administrative and tax burdens on startups and smaller businesses, and use any regulatory flexibility it has to make funding more accessible.

FSNForum also recommended that the UK undertake a full review of the F4 Alliance, a proposed partnership with Switzerland, Hong Kong and Singapore.

Set up last year in the aftermath of the Brexit vote, FSNForum is a non-profit organisation consisting of Leavers and Remainers designed to provide unbiased research on the uncoupling process between the EU and the UK.

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