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Brexit: Michel Barnier delivers warning over NI protocol

  • Financial Conduct Authority (FCA) proposes plans to strengthen London’s financial services sector
  • Former EU Chief Negotiator Michel Barnier delivers Brexit warning to Britain
  • EU fishermen plotting another “Channel rebellion”
  • British pound to euro (GBP/EUR) exchange rate stuck at EUR 1.16

The Financial Conduct Authority (FCA) has published proposals to strengthen the UK’s financial services sector to improve competition in the capital city post-Brexit.

It comes after the FCA reported a significant drop in newly authorised asset management firms in 2020, with numbers declining by more than 50% amid the challenges of Brexit and COVID-19.

According to the latest reports, there were only 97 newly authorised financial firms in 2020, compared with 221 in 2016 – the year that Britain voted to leave the European Union.

Industry commentators and experts have warned that the slump in the authorisation of new firms could have severe consequences for investors, especially now that consolidation is booming.

Still, consolidation is making the financial services market top-heavy. The FCA has set out to introduce a dual-class share system for “innovative, often founder-led companies” listed on the premium main market of London’s stock exchange.

The dual-class share structure is already widely used by New York firms, as it allows owners and executives to have greater control over shares even if they have fewer stakes in the company.

The FCA has also suggested cutting the number of shares available to the public from 25% to 10% and raising the minimum market capitalisation on all segments for regular commercial firms to GBP 50M from GBP 700K.

FCA Director of Market Oversight, Clare Cole, believes that the proposed listing reforms will be “essential” if the British government wants to ensure the UK remains a dynamic and attractive investment destination.

She added: “We are acting assertively to meet the needs of an evolving marketplace to increase choice for investors while maintaining the appropriate levels of protection.”

The FCA has also received the backing of EU Commissioner Jonathan Hill, who said that the new proposal would ensure that London becomes the market of choice for investors post-Brexit.

It comes as former EU Chief Negotiator Michel Barnier delivers a stark warning to UK Prime Minister Boris Johnson about the risks Britain faces if London fails to uphold the Brexit treaty.

EU threatens to block vaccine exports to UK

Michel Barnier urges UK government to respect Brexit deal

Tensions between the UK and the European Union continue to heighten, with both sides at odds over implementing the Northern Ireland protocol.

In an interview with Euronews, Mr Barnier stated: “I am confident that this great country will respect their signature, even if there are intentions that I struggle to understand.”

Although the dispute between London and Brussels over the so-called “sausage war” has been resolved, Michel Barnier said the UK government should tread carefully if they don’t want to undermine trust with the bloc.

Before a ban was due to be imposed, the EU agreed to extend the grace period on chilled meat products traded across the Irish Sea by three months.

German Chancellor Angela Merkel is also hopeful that the UK and the EU can solve outstanding matters and avoid further trade disruption stemming from Northern Ireland protocol.

Ms Merkel said: “The three-month extension is great news, and hopefully, it will give us time to solve the issue pragmatically.”

However, Mr Barnier’s warning appears to have sparked uproar amongst Britons, with one person accusing the EU of breaking the UK’s trust.

Michel Barnier advised the European Commission to be wary of the UK and any changes to fiscal, social or environmental standards to maintain the competitive advantage against the city of London.

He urged Britain to respect the Brexit treaty, noting that the “most important matter for the UK is to maintain access to the EU’s single market.

“If the UK wants to maintain their image, it would be best if they respect the Brexit treaty, which is also important for the trust we need.”

Although Northern Ireland departed the European Union, it remained part of the EU’s single market to minimise the risk of reigniting conflict between NI and the Republic of Ireland.

Still, while new Brexit trade rules may have limited any fallout in Ireland, it has damaged Britain’s relationship with Northern Ireland.

Leader of the Democratic Unionist Party (DUP) Sir Jeffrey Donaldson warned Boris Johnson that Brexit protocol is threatening to undermine the unity of the UK.

Northern Ireland protocol

Brexit protocol damaging relations between UK and NI

Several Northern Ireland politicians, including Irish Minister of Foreign Affairs Simon Coveney and DUP leader Sir Jeffrey Donaldson, have warned of the negative impact post-Brexit trade rules have on the relationship between the UK and NI.

Simon Coveney claimed that the British government would rather tear down NI protocol than build a mutually beneficial relationship with the EU to resolve outstanding issues.

Cabinet Office Minister Lord David Frost welcomed the extension of the grace period on chilled meats but said it was only a tiny part of a far more significant issue.

He urged Brussels to make further concessions to avoid any additional disruption to peace in Northern Ireland, warning that the current rules risk damaging the Good Friday Agreement, which has maintained harmony in the region since 1998.

However, after Lord David Frost accused the EU of “lurching from crisis to crisis” in the latest chapter of the NI Protocol dispute, Ireland’s foreign affairs minister, Simon Coveney, accused Britain of showing no generosity.

Mr Coveney said given that the EU already offered concessions this week, Lord Frost’s comments were a “bizarre way to acknowledge their generosity and build a partnership.”

He went on to say that “the UK government has failed to acknowledge the advances that have been made this week, which could help strengthen Britain’s relationship with the bloc.

“The EU has shown generosity and responded to requests from Britain and NI by offering concessions, but the UK has shown no flexibility in the context of the protocol.”

Brussels also revised its rules on pharmaceutical drugs, allowing medicines to flow more freely between Britain and Northern Ireland, and backtracked on plans to make UK drivers show a green card to border authorities when entering continental Europe.

DUP Leader Sir Jeffrey Donaldson said that new Brexit trade rules had damaged Northern Ireland’s relationship with Britain and Ireland.

While he is hopeful that the situation will improve as opportunities arise moving forward, he said there are too many unnecessary trade barriers.

Northern Ireland isn’t the only region in the UK facing the consequences of post-Brexit trade rules. Jersey is set to experience another round of protests from French fishers over the licensing issues.

French fisherman plotting another Channel rebellion

Under the new Brexit treaty, French fishermen would need to obtain new licenses to evidence their fishing history in Jersey’s waters.

As Jersey claimed that some fishermen had not provided substantial proof of their fishing history, they were given limited access under provisional licenses.

However, this sparked uproar among French anglers, many of which descended on Channel waters in May to protest.

Britain sent patrol boats and two Navy vessels to the English Channel to monitor the protests after French fishing boats built a blockade around the island of Jersey.

Jersey later conceded to demands about extending temporary permits, with the interim agreement now lasting until September end.

Despite the extension, Britain’s Crown Dependency’s Assistant Environment Minister warned that the new deadline could fuel another round of protests from French fishermen and told Jersey to brace for every possible scenario.

Several French fishing organisations have also refused to rule out any further retaliatory action if the issues over licensing are not resolved by September.

Signs that UK-EU relations are deteriorating has also poured cold water over pound Sterling (GBP), which has retreated to the EUR 1.16 level on the first day of the new trading week.

GBP/EUR stifled by mixed headlines

After breaching the EUR 1.17 level last month, the British pound to euro (GBP/EUR) exchange rate has found itself trading back at the EUR 1.16 level in July.

At the time of writing, GBP/EUR is trading flat at EUR 1.1667 due to mixed headlines, with investors weighing up Brexit tensions with rising COVID-19 cases and UK economic data.

Although the economy is rebounding from the coronavirus pandemic, doubts about recovery are starting to creep in, with businesses reporting staff shortages and supply challenges.

Meanwhile, COVID cases in Britain continue to spike, with 24,248 new cases reported on Sunday.

UK Prime Minister Boris Johnson’s announcement could offer GBP/EUR a boost if his plans to ease all COVID restrictions in Britain on July 19th are given the go-ahead.

However, Economists have warned that Britain is set for an uneven recovery, limiting any upside potential in the British pound to euro (GBP/EUR) exchange rate in the near term.