Britain’s EU summit is Starmer’s chance to prove he champions the City
Britain’s EU summit is a welcome step towards repairing our relationship with Europe, but the City and its industries must be at the forefront, writes Michael Cole-Fontayn, chair of TheCityUK’s Europe Market Advisory Group
Today, Prime Minister Sir Keir Starmer will host the fourth summit of the European Political Community (EPC) at Blenheim Palace. This event marks his first opportunity to engage collectively with European leaders from both within and outside the EU.
The meeting is also a significant milestone for the UK-based financial and related professional services industry, which sees the strengthening of UK-EU business relationship as a top priority. The government’s stated intention to advance the Windsor Framework and further enhance relations with the EU resonates positively with the industry.
The EPC’s aim is clear: to serve as a broad forum for European nations to discuss and coordinate responses to the continent’s most pressing strategic challenges. The EPC goes beyond the specifics of UK-EU dynamics to include a broad group of non-EU members, like Ukraine and also Switzerland, another major European financial centre.
Originally set by former UK Prime Minister Rishi Sunak, the agenda for this week’s summit emphasises support for Ukraine and the challenge of illegal migration. However, it is also expected to cover broader issues critical to European stability, such as security, economic resilience and the transition to net zero.
These discussions hold significant weight for the UK, which, despite its sovereign status outside the EU, remains influenced by the legislative and economic decisions made in Brussels and other European capitals. While the finer details of UK-EU economic relations will continue to be governed by the UK-EU bilateral Trade and Cooperation Agreement (TCA), the UK’s role within Europe extends far beyond relationships with the EU institutions.
The City strongly supports the government’s initiative to foster closer UK-EU ties, particularly through a security-focused approach. It recognises the value in collectively addressing strategic questions concerning European security and economic resilience, especially trade in services, given the current geopolitical backdrop. To this end, we were pleased to see the Prime Minister include his minister for European relations in the recent NATO summit in the US and the foreign secretary’s prompt visits to several key European allies to discuss security matters within 48 hours of taking office.
This proactive move not only reinforces the UK’s commitment to developing shared strategic cooperation with Europe but also underlines the importance of collaborative relationships in tackling broad regional challenges.
The narrative of European strategic cooperation discussed within such broad forums as the EPC can significantly help to more effectively frame the narrower issue of the UK-EU relationship. On a working level, agreements on many complex issues, particularly involving Northern Ireland, have been resolved, while the backdrop of Putin’s invasion of Ukraine has underscored the UK’s role as an important and reliable European ally. This reliability has sparked a surge in the number of calls from within the EU and its member states for a closer defence and security partnership with Britain.
There are, however, many areas beyond defence where the UK has much to offer in contributing to a collective European effort. Its effective participation, however, hinges on the policies of other nations. The EPC meeting is a crucial and valuable forum for the government to integrate these diverse, yet often siloed, discussions.
Much of the focus of UK-EU discussions around improving trade is likely to be focused on goods – sectors that are most impacted by post-Brexit arrangements due to their deep integration within European supply chains. However, if the UK and the EU are serious about working together to address the challenges of the coming decades – demographics shifts, energy transition, enabling Europe’s innovative companies to scale up, ongoing conflicts and the increasing geopolitical competition and regionalisation of global trade – policymakers must focus on the financial and related professional services industry as a key enabler, essential for driving economic growth and funding these transformative challenges.
The UK’s status as a world-leading international financial centre has endured headwinds over the past decade. Financial and related professional services remain the UK’s largest net exporting industry by some distance, with 29 per cent of its exports destined for the EU, second only to the US. The industry not only accounts for 12 per cent of the UK’s total economic output and employs over 2.4m people – with two thirds of these outside London across the country’s regions and nations – but also pays more corporation tax than any other sector.
However, there is a pressing need for closer collaboration with European capitals and Brussels to underline that further fragmentation of European financial services markets and capabilities is lose-lose. Both the UK and the EU have already lost ground to the US in many areas and face similar issues with their capital markets, with European companies often opting to list in New York. It’s critical to foster a mutual understanding that Europe benefits from lower capital costs and that the UK’s status as a stable and open international financial centre are vital assets to Europe.
The upcoming EPC should provide an opportunity for the government to demonstrate its commitment to strategic UK-EU cooperation, putting the bilateral UK-EU relationship within a broader strategic framework. To deliver this, the government needs to collaborate with our industry and foster an environment that further stimulates growth and investment across the continent, addressing both current challenges and those ahead, reinforcing the UK’s significant role in European prosperity.
Michael Cole-Fontayn is chair of TheCityUK’s Europe Market Advisory Group