The Financial Conduct Authority (FCA) has said it will take a “tough, assertive approach” to firms operating in the UK with temporary permissions in the wake of Brexit when their deals expire.
In the run-up to Brexit, the FCA had set up a temporary permissions regime allowing firms to continue to trade in the country during the transition period, ahead of when the UK would eventually leave the bloc.
Firms in Europe that were passporting into the UK when the transition period ended have been allowed to continue operating temporarily in the UK, as long as they applied before December 30, 2020.
While trading under temporary permissions, firms could seek full authorisation from the FCA or sister regulator the Prudential Regulation Authority to continue to access the UK market.
In March, the FCA began reaching out to firms using the regime to confirm the so-called ‘landing slot’ — the opening and closing dates — for them to either make their case to become permanently regulated in the UK or stop operating in the region by ditching their temporary powers.
Speaking at the regulator’s annual public meeting on September 28, executive director for markets Sarah Pritchard said that the watchdog would be “taking a tough, assertive approach to those firms that want to continue to operate in the UK continue to meet our standards.”
“For firms that don’t meet (UK standards) or no longer wish to continue to be UK regulated, we will be taking steps to remove their permissions’’, she added.
“There will be lots of activity in the weeks and months ahead. It is an important area for us to work not just with government but with firms as they seek to adapt to this new future.”
The comments will add to concerns that many UK financiers have about business heading out of London’s financial district and onto the continent in the wake of Brexit.
In the absence of widespread regulatory equivalence between the firms in the financial district and their European peers, sectors such as clearing are currently operating on short-term extensions to existing deals.
SLOW GROWTH
Meanwhile, weak UK economic growth figures and a warning from the International Monetary Fund (IMF) are adding to the concerns in the department of trade and at the Bank of England about the current health of the economy. Fresh data from the Office for National Statistics (ONS) showed that the UK economy grew by just 0.4 per cent in August.
While an improvement on the prior month, it was weaker than the 0.5 per cent economists had expected. The ONS also revised down its numbers for July, saying it now believes the UK economy contracted slightly rather than grew. The ‘pingdemic’ — in self isolation — which forced many people to stay home, was blamed for the slump.
The UK economy remains 0.8 per cent smaller than it was prior to the pandemic and is struggling to get back to its pre-Covid position.
“Key sectors of the economy are still struggling, notably retail (and) construction, and many sectors are being hit hard by supply chain issues’’, said Jonathan Gillham, chief economist at PwC.
“High gas prices are also damaging the economy and there are still issues relating to self-isolation that are particularly affecting the parts of the economy that sell goods overseas.”
The downbeat data came a day after the IMF downgraded growth forecasts for the UK, in line with worsening conditions around the world. The IMF now expects the UK economy to grow by 6.8 per cent this year, against an earlier forecast of 7 per cent.
(The writer is our foreign correspondent based in the UK)
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