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Brexit talks resume, Financial Services Bill brought before Parliament, and CMA draft guidance published

Publish Date 28 Oct 2020
Categories Brexit Bulletin

Brexit talks resume after impasse

On 21 October, Brexit negotiations between the UK and the EU resumed following a week-long impasse. The UK government published a list of principles under which the talks would continue, and Lord Frost and Michel Barnier have agreed to meet daily to help finalise a deal. In line with a demand made by the UK, both sides will resume talks on all subjects based on proposed legal texts prepared by officials. They have also agreed that "nothing is agreed" until progress has been reached in all areas, which has been a demand of the EU. Key areas of disagreement include fishing rights, post-Brexit competition rules and how the deal would be enforced.

Financial Services Bill brought before Parliament

On 21 October, the Government introduced the Financial Services Bill to Parliament. The Bill sets out measures aimed at ensuring the UK's regulatory framework continues to function effectively at the end of the transition period. Key measures include:

  • introducing a new Investment Firms Prudential Regime;
  • clarifying and extending the FCA's powers to manage an orderly wind-down of a critical benchmark, such as LIBOR;
  • introducing a new overseas funds regime to allow overseas collective investment schemes to be marketed to all investors in the UK market on appropriate terms;
  • updating the equivalence regime under MiFIR to provide the FCA with a power to specify reporting requirements and amend the equivalence assessment criteria;
  • amending the FCA's cancellation of authorisation process to provide the FCA with a mechanism to cancel or vary authorisation more quickly;
  • making amendments to the PRIIPs Regulation to clarify its scope, remove the obligation to produce performance scenarios and to extend the current UCITS retail schemes exemption up to a maximum of five years.

The Bill is expected to be brought in to law before the end of 2020, subject to parliamentary scrutiny.

Government publishes consultation on CMA draft guidance

The Government has published a consultation on the content of the draft guidance on the functions of the CMA after the end of the transition period, in particular on whether it provides sufficient information and clarity. The draft guidance outlines the legal changes expected to result from 31 December 2020, when the transition period ends. The deadline for the consultation is 30 October and the CMA will publish a final version of the updated guidance before the end of the year.

Consultation on the future of FS regulatory framework

HM Treasury has published a consultation on the second phase of the Financial Services Future Regulatory Framework (FRF) Review. Following the publication in March 2020 of the Government's response to phase one on coordination between the UK's regulatory authorities, phase two of the review is aimed at developing the UK's long-term regulatory approach to financial services post-Brexit.

UK finalizes post-Brexit trade deal with Japan

Liz Truss, the International Trade Secretary, signed the UK-Japan free trade agreement in Tokyo on 22 October, which is to come into force from 1 January 2021. The UK-Japan Comprehensive Economic Partnership Agreement is reported to replicate the EU-Japan agreement, but it includes an extra chapter on digital trade and lacks the quotas for agricultural exports.

Internal Market Bill faces opposition from the House of Lords

The Government suffered a defeat in the House of Lords on the Internal Market Bill, which was criticised for overriding parts of the Withdrawal Agreement with the EU and how it should apply to the Irish border. On 19 October, peers passed by a majority 226 a “regret” amendment, condemning the disputed provisions. The Government is expected to force the bill through the House of Lords later this month.

Model for future UK-EU border updated

On 8 October, the Government published an updated version of the Border Operating Model, which was first published in July, as it continues its preparation for the end of the transition period. The updated guidance on the UK-EU border outlines that hauliers will need a “Kent access permit” to proceed to the border, and further states that EU, EEA and Swiss national ID cards will not be accepted for travel to the UK from October 2021 onwards. The plans also include proposals for the creation of 10 inland sites to cope with Brexit congestion.

Survey and research round up

Poll reveals level of Brexit business preparedness

A YouGov survey of 1000 businesses found that 30% of respondents have said they are “poorly” or “very poorly” prepared for the end of the Brexit transition period. 8% said the government had done a “very good job” regarding Brexit preparedness and 20% described it as “somewhat good”.

7500 FS jobs move from UK to EU

More than 7,500 UK financial services roles have been relocated to Europe as firms make their final Brexit preparations, according to EY's latest Brexit Tracker. The survey found that more than 400 of the job moves have been announced in recent weeks, ahead of the transition period on 31 December.

Please feel free to contact the Policy Team for further information on any of the matters raised in this update.