Jeremy Hunt, UK chancellor, will sign a financial service deal with Switzerland on Thursday. He claims that it will facilitate business between wealthy individuals and financial firms in both markets.
The UK-Swiss agreement is based on mutual recognition of regulatory regimes. It is designed to strengthen the City of London after Brexit.
Hunt will claim during a Bern visit that Brexit allowed Britain to make its own agreements with major financial centers.
The Treasury stated that the Bern Financial Services Agreement was only possible because of the new freedoms given to the UK after its exit from EU. The agreement will strengthen the UK-Switzerland relationship in financial services, which is already flourishing.
Rishi Sunak, then chancellor of the 2020 election cycle, began negotiations with Switzerland for a deal on mutual recognition. He said that the deal would show a shared vision for an “open global and free economy”.
Hunt and his Swiss counterpart Karin Keller Sutter will sign an agreement in Bern that recognizes each other’s laws and regulations regarding financial services.
The Treasury stated that the agreement will make it easier for wealthy and corporate clients to do business in both markets.
The statement continued: “This relationship is based on a commitment towards international standards, and a belief in the importance of open and resilient markets.”
David Henig, UK Director at the European Centre for International Political Economy said that the deal was “generally good news”, and took advantage of Britain’s global financial services weight.
He said that while he would not be able to set the rules for cars or artificially intelligent systems, he could have an influence on financial services.
Hunt said that, if Britain had been a member state of the EU, it would have enjoyed “equivalence deals” with Switzerland in terms of regulatory standards. However Hunt’s deal with the Swiss may be more advantageous.
He said, “We don’t know the details yet but it is likely better than the EU’s equivalence scheme.”
The Swiss are not a member of the EU, but their previous trade agreements with the UK were also based on EU regulations. The UK was at risk of being downgraded from a member state to a third-country with very limited access rights when it left the EU.
Both countries have moved quickly to implement a number of temporary agreements in order to maintain the status quo, but they are also aiming to reach a more comprehensive trade agreement.
Switzerland is one of London’s most important trading partners and the largest offshore centre in the world. According to a Boston Consulting Group report published in June, Swiss banks manage $2.4tn worth of assets for the world’s wealthiest people. Switzerland is the UK’s third-largest non-EU trading partners, behind the US and China.
A diplomat in Bern stated that the agreement reached this week permanently restored UK access to Switzerland’s financial sector. It also provided some additional benefits. The agreement also opens the door to a comprehensive trade deal.
The Swiss will gain clout by resuming its negotiations with Brussels after two years of a complete breakdown.
Senior figures in the insurance sector said that the industry had worked to facilitate trading between the specialist insurance markets of the two countries, where large assets like planes and pipes are insured by global firms.
In the UK, Lloyd’s of London is the main hub for negotiating these policies. Meanwhile, Switzerland hosts large insurance and reinsurance companies such as Zurich or Swiss Re.
According to a person who is familiar with Hunt’s agreement, it will exempt London insurance brokers from the new rules which would have required them to open a Swiss branch to place the risks of their clients with local insurers. The person who spoke to us said that this would save significant costs and complexity.
The Treasury reported that UK financial and insurance services trade with Switzerland increased by 53 percent between 2016 and 2022 — to reach £3.28bn.
Miles Celic is the chief executive officer of TheCityUK lobby group. He said that the deal offered more benefits than “equivalence agreements” offered by the EU.
He said, “It is also the beginning of a journey.” The arrangements can be further developed over time, and if successful could serve as a model for future agreements between other markets.
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