Chancellor Jeremy Hunt has inked a significant deal aimed at enhancing collaboration between financial institutions in the UK and Switzerland.
Valued at over £3 billion, the trade in financial services between the two nations will benefit from the newly established Berne Financial Services Agreement, fostering mutual recognition and acceptance of regulatory frameworks.
The agreement, according to Mr. Hunt, signifies a concerted effort to open up markets between the UK and Switzerland, ultimately promoting healthy competition and expanding choices for financial entities on both sides.
Notably, the chancellor emphasized that this milestone was only achievable due to the UK’s departure from the EU, highlighting the agility and independence gained in crafting bespoke agreements.
This “new type” of agreement, as described by Mr. Hunt, deviates from conventional practices of aligning legal structures, paving the way for a tailored approach that avoids a one-size-fits-all template for future deals.
Under this arrangement, UK-based firms will find it easier to serve Swiss clients, relying on familiar UK practices, and vice versa for Swiss firms, a move expected to particularly benefit firms in asset management, wholesale insurance, and banking markets.
The negotiations leading to this agreement have been underway since June 2020 when Prime Minister Rishi Sunak held the position of chancellor.
Notably, industry leaders in British finance have lauded the deal’s dynamic nature, acknowledging its adaptability to evolving regulatory landscapes in both markets over time.
Switzerland, home to over $2 trillion in wealth controlled by some of the world’s wealthiest individuals, is a major center for insurance and re-insurance.
This aligns with London’s strengths, notably housing Lloyd’s, the world’s largest insurance market. Mr. Hunt underscored the strategic advantage of this agreement, playing to the UK’s strengths, albeit acknowledging that its impact would be modest.
Nevertheless, he noted that it serves as a powerful signal, asserting the UK’s prowess as a dynamic financial center.
Navigating the intricacies of insurance industries in both countries proved to be the most challenging aspect of the deal, according to insights from the BBC.
The UK’s relationship with Switzerland stands as its third-largest non-EU trading partnership, following the US and China, a testament to the economic significance of this agreement.
Finance leaders in the UK are optimistic that the deal with Switzerland will serve as a blueprint for agreements with other major financial centers, with Singapore emerging as a potential candidate.
London’s status as the leading European financial hub has faced challenges, evident in the migration of share trading to European exchanges like Paris and Amsterdam and the relocation of high-profile UK companies, including ARM Holdings, to New York.
Amid the changing landscape, the UK’s negotiation of a deeper and wider free trade agreement with Switzerland adds another layer of significance to this development.
Post-Brexit, the UK government has been actively revamping financial regulations to bolster London’s appeal against its European counterparts.
While Mr. Hunt’s earlier announcement of the Edinburgh Reforms aimed at reshaping financial regulations received mixed reviews, with the chair of the Treasury Select Committee, Harriet Baldwin, describing them as “a damp squib,” the recent signing of the financial services agreement provides a more optimistic outlook for the future of UK-Switzerland relations.
As Chancellor Hunt and his Swiss counterpart, Karin Keller Sutter, convene on Thursday, this pact offers a positive note amid ongoing efforts to solidify economic ties beyond the EU.
Last Updated: 22 December 2023