Zahawi to outline plan to change EU’s City rules in Mansion House speech
The UK’s new chancellor will try to soothe City jitters tomorrow night as a major new report suggests the Square Mile is suffering as a result of political uncertainty.
Nadhim Zahawi will tell the annual Mansion House bankers’ dinner that he will “repeal hundreds of pieces of retained EU law” post-Brexit and replace them with “a coherent and agile approach to financial regulation that is right for us”.
The government will put publish its long-awaited Financial Services and Markets Bill on Wednesday as Westminster prepares to rise for summer recess.
The legislation will be debated in parliament in September.
The promised regulatory overhaul comes as a report today from consultancy Bain and Company and trade association BritishAmerican Business warned the UK risks forgoing a wave of US investment unless it irons out its post-Brexit trading relationship with the EU.
The report said the UK-US economic corridor remains strong, but would be strengthened by London cooling tensions with Brussels.
Zahawi will confirm tomorrow that the Financial Services and Markets Bill will include plans to ease the EU’s Solvency II directive – which forces insurance firms to put aside certain amounts of capital – in a bid to unleash tens of billions more private sector investment.
The chancellor will say the Solvency II changes will mean “UK insurers have more flexibility to invest in long-term assets like infrastructure” and will help ensure that “we’ll maintain our position as one of the most dynamic financial centres in the world”.
“We are steadying the ship. We are stabilising the economy. We are getting on with the task at hand,” he is expected to say.
The new legislation will also include a new directive to force financial services regulators to consider decisions through the prism of improving the City’s global competitiveness.
New City minister Richard Fuller told City PM: “We will unleash the power of enterprise, and take advantage of leaving the EU to do things differently.
“We will repeal hundreds of outdated and burdensome EU laws to deliver a better system that works in the interests of British people and businesses. And we will unleash tens of billions of pounds of investment into the UK economy by unlocking reforms to Solvency II.”
Heightened political and regulatory risk has tempered American companies’ plans to expand in the UK. US firms’ confidence in Britain dropped to 7.3 this year from 7.8 in 2021, the Bain report found.
The UK government has threatened to tear up the Northern Ireland protocol, raising the risk of the post-Brexit trade deal with the EU being suspended.
London and Brussels have also yet to reach a deal to recognise each other’s financial services regulatory regime, known as an equivalence agreement.
Duncan Edwards, chief executive of BritishAmerican Business, called on the winner of the Conservative leadership contest to fix these problems or risk the UK losing its place as “the leading place to do business for transatlantic investors”.
A government spokesperson told City PM: “We are boosting UK-US trade and unlocking opportunities for businesses on both sides of the Atlantic.”