On February 2, 2017, the Department for Exiting the European Union, the department of the UK government tasked with extricating the UK from the EU, published a white paper on the UK’s exit from and new partnership with the EU. The white paper contains further detail on the UK government’s approach to financial services in sections 8.22 to 8.26.

The white paper states that the UK government will target the following aims in its negotiations with the EU in respect of the financial services sector:

• Achieving the “freest possible trade” in financial services between the UK and EU member states.
• Establishing strong co-operation and oversight arrangements with the EU, reflecting the interconnectedness of financial markets. The paper suggest that the UK will continue to support and implement international financial standards.
• Negotiating on the UK’s future status and arrangements with regard to EU agencies, including the European Supervisory Authorities (ESAs) (that is, ESMA, EIOPA and the EBA).
• Agreeing on a “phased process of implementation” to allow for the UK and the EU to prepare for the new arrangements that will apply following the UK’s departure from the EU. It is suggested that the phased process might relate to the future legal and regulatory framework for business. In any event, the UK government will take steps to mitigate the impact on economic and other functions, including passing legislation if necessary.

The UK government argues that factors such as the UK’s legal system, language and infrastructure will help to ensure that it remains a preeminent global financial center after the implementation of Brexit.

Further to the publishing of the white paper, the Financial Markets Law Committee published a letter on February 3, 2017, addressed to Andrew Tyrie, Treasury Select Committee chair, commenting on the UK’s financial services industry in the context of the UK’s withdrawal from the EU. The letter has been written in response to the Committee’s inquiry on the UK’s future economic relationship with the EU. The letter notes that post-Brexit, the UK will lose access to the European single market in financial services and will become a third country from the perspective of EU law. The letter notes that there are serious uncertainties as to the conditions that the UK and regulators will have to satisfy as a third country. As such, staged transitional arrangements negotiated well in advance of the UK’s withdrawal from the EU will be valuable in promoting legal certainty and minimizing disruption.