In a move to strengthen ties between their respective financial centers post-Brexit, the UK and Switzerland are set to sign an agreement on Thursday. The Chancellor of the Exchequer, Jeremy Hunt, will visit Bern to finalize the deal, which has been in the works since 2020. This mutual recognition agreement aims to facilitate cross-border market access for a wide range of financial services, including insurance, banking, asset management, and capital market infrastructure.
Presenting new trade deals as one of the benefits of Brexit, the UK government has been actively pursuing agreements with various nations. Earlier this year, the UK struck a deal to join the Indo-Pacific free-trade bloc comprising 11 nations such as Australia, Japan, and Canada. However, despite these efforts, the economic impact of reduced trade with the EU, the UK's largest trading partner, since its exit three years ago is still a pressing challenge. The UK's independent budget watchdog estimates that Brexit has led to a 4% decline in economic output.
Brexit has significantly affected the City of London, the UK's financial hub. Since the City was excluded from the post-Brexit trade deal with the EU that came into effect at the beginning of 2021, London-based firms have been compelled to relocate billions of dollars in assets and thousands of staff to continue operating in the EU bloc.
The agreement to be signed between the UK and Switzerland marks a positive step towards mitigating the impact of Brexit on the UK's financial sector. According to the Treasury, UK trade in financial and insurance services with Switzerland reached £3.3 billion ($4.2 billion) in 2022. This agreement, known as the Bern Financial Services Agreement, is made possible by the new freedoms granted to the UK after its departure from the EU. It is expected to enhance the already thriving financial services relationship between the UK and Switzerland.
As the UK continues its journey outside the EU, securing agreements like the one with Switzerland is crucial to maintain London's status as a global financial center. By deepening ties with Switzerland, renowned for its strong financial services industry and reputation for stability, the UK aims to regain some of the ground it lost due to Brexit. The agreement will provide necessary reassurance to financial institutions and businesses operating in both countries, ensuring smoother market access and facilitating future collaboration in the financial sector.
While this agreement is a positive development, there is still a long road ahead to fully recover from the economic impact of Brexit. The UK will need to continue forging new partnerships and trade agreements to bolster its economy and minimize trade disruptions. In the face of ongoing challenges and uncertainties, the signing of this agreement serves as a step towards rebuilding and strengthening the UK's position in the global financial landscape.