Brexit offers Britain opportunity to move faster than EU on financial services regulation

Jonathan Hill says the UK can act ‘more nimbly' to ensure it remains an ‘attractive place to do business’

A picture shows an empty street in the City of London on March 24, 2021 as life continues with England following a government roadmap to easing the coronavirus lockdown restrictions.   Britain on March 23 marked the anniversary of its first coronavirus lockdown with a minute's silence in tribute to the more than 126,000 people who have died -- one of the world's worst tolls. / AFP / DANIEL LEAL-OLIVAS
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Britain has the opportunity to move faster than the European Union as it sets its financial services regulations post-Brexit, Jonathan Hill, the author of a landmark listings review, told a virtual webinar on Thursday.

Former EU commissioner Mr Hill, whose review sets out a series of recommendations for the UK financial services sector, said Britain can now set rules “more swiftly, more competitively and more intelligently”.

As the UK considers its financial services legislation outside the EU, Mr Hill said there is an obvious opportunity for the country as it looks to achieve its ambition to be a global financial centre.

“We're not part of that consensus based, laborious process, where the European Parliament in particular tends to complicate legislation, and in crude terms, takes a pretty risk-averse attitude towards legislation," Mr Hill told a webinar hosted by the Centre of Policy Studies to examine the future of the City of London.

“So there are opportunities clearly for the UK, as a unitary state, to move faster, more intelligently, more proportionately and more nimbly in how we set about doing regulation.”

UK finance minister Rishi Sunak commissioned Mr Hill to write the listings review as part of the government's bid to overhaul the London Stock Exchange in a post-Brexit shake-up.

Mr Sunak wants to help London compete with global centres such as New York, Amsterdam and Frankfurt and lure tech founders to the London Stock Exchange.

Mr Hill said the UK should avoid diverging from other jurisdictions or ripping up the rulebook “for the sake of it”.

“If we have an ambition to be a global financial centre, then clearly it makes sense for us to follow global financial standards," he said.

“To make sure the UK is a very attractive place for people to do business, we'll want to go for high standards. Our politicians and our regulators, now have an opportunity to set an appropriate regulatory framework, both for the UK and for us as a global centre.”

In the run-up to Britain’s exit from the EU, several global banks moved financial staff and assets from the City of London to Europe with the number of Brexit-related job moves totalling 7,600, financial services consultancy EY said.

While the pace of asset and job relocation announcements had since eased, it would be replaced by “a slower yet ongoing movement of people and assets to Europe for compliance purposes", said Omar Ali, a financial services managing partner at EY.

03/03/2021. London, United Kingdom. Chancellor of the Exchequer Rishi Sunak leaves Downing Street to deliver his annual budget in parliament . 11 Downing Street. Picture by Simon Dawson / No 10 Downing Street
Mr Sunak leaves 11 Downing Street to deliver his annual budget in parliament. Mr Sunak wants to help London compete with global centres such as New York, Amsterdam and Frankfurt. Simon Dawson / No10 Downing Street

Mr Hill's review, unveiled alongside Mr Sunak's budget earlier this month, recommended updating rules around free float requirements, dual-class structures and special purpose acquisition companies, to strengthen the UK's position as a world-leading financial centre.

Reducing free float requirements – the amount of a company’s shares in public hands – to 15 per cent from 25 per cent, will allow companies to use other measures to demonstrate liquidity.

Mr Hill's review immediately attracted the interest of British food delivery start-up Deliveroo, which said it picked London for its £8.8 billion ($12.07bn) stock market flotation in April because of the planned overhaul.

Tom Clougherty, head of tax at the Centre for Policy Studies, said Brexit and the regulatory divergence it opens the door to is the opportunity the UK has been waiting for “to reprioritise growth and competitiveness”.

Looking ahead, Mr Clougherty said regulation should seek to promote competition and to embrace and enable innovation.

"Certain parts of the financial services industry could change quite dramatically in the years ahead, in a way that perhaps hasn't been the case in the past," he said, referring to the growth of FinTech and the increasing adoption of digital currencies.

"You want regulation to enable or to encourage that, never to stand in his way," Mr Clougherty said.