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UK chancellor Jeremy Hunt will on Thursday sign a financial services deal with Switzerland, claiming it will make it easier for financial firms and wealthy individuals in the two markets to do business with each other.
The UK-Swiss deal is based on the mutual recognition of each other’s regulatory regimes and is intended to bolster the City of London in a post-Brexit era.
Hunt will claim on a visit to Bern that the agreement was made possible by Brexit allowing Britain to strike its own deals with major financial centres.
“The Bern Financial Services Agreement is only possible due to new freedoms granted to the UK following its exit from the EU,” the Treasury said. “The agreement will enhance the UK and Switzerland’s already thriving financial services relationship.”
Negotiations with Switzerland on a mutual recognition deal were launched by Rishi Sunak when he was chancellor in 2020. He claimed that a deal would demonstrate a shared vision of an “open, global and free” economy.
Hunt will sign the agreement with his Swiss counterpart Karin Keller-Sutter in Bern, mutually recognising each other’s domestic laws and regulations on financial services.
The Treasury said the agreement would make it easier for corporate and wealthy clients in the two markets to do business with each other.
It added: “This relationship is underpinned by a commitment to international standards and a shared belief in the value of open and resilient financial markets.”
David Henig, UK director at the European Centre for International Political Economy, said the deal was “broadly good news” and exploited Britain’s global weight in financial services.
“We aren’t going to be setting the rules in cars or artificial intelligence but in financial services we do have some influence,” he said.
He added that if Britain was still a member of the EU it would have enjoyed regulatory “equivalence” deals with Switzerland but Hunt’s agreement with the Swiss could potentially be better.
“We haven’t seen the details yet, but this is probably better than the equivalence framework with the EU,” he said.
Although Switzerland is not an EU member state, its former trade arrangements with the UK were based on EU rules. When Britain left the bloc it risked being downgraded to the status of a third country with extremely limited access rights.
The two countries moved swiftly to implement a series of temporary agreements to extend the status quo but have aimed to conclude a more comprehensive and durable trade arrangement.
Switzerland is the world’s biggest centre for offshore wealth and one of the most important trading partners for the City of London. Swiss banks manage an estimated $2.4tn of assets on behalf of the world’s richest people, according to a report by Boston Consulting Group this June. Switzerland is also the UK’s third largest non-EU trading partner, after the US and China.
This week’s agreement permanently restores UK access to the Swiss financial sector, with some additional benefits, a diplomat in Bern said. It also paves the way for a more comprehensive trade deal.
Cementing ties with Britain will meanwhile give Switzerland clout in its own negotiations with Brussels, which are only now poised to restart after breaking down completely two years ago.
Senior insurance industry figures said the sector had pushed to ease trading between the two countries’ specialist insurance markets, where big assets such as planes and pipelines are insured by a range of global firms.
The UK’s market is centred on Lloyd’s of London, which is a hub for negotiation of these policies, while Switzerland is host to big insurance and reinsurance groups such as Zurich and Swiss Re.
A person familiar with Hunt’s agreement said it would exempt London-based insurance brokers from new rules that would have forced them to set up a branch in Switzerland in order to place their clients’ risks with local insurers. This would avoid significant extra cost and complexity, the person said.
The Treasury said that between 2016 and 2022, UK trade in financial and insurance services with Switzerland grew by 53 per cent — reaching £3.28bn in 2022.
Miles Celic, chief executive of lobby group TheCityUK, said the deal was “an exciting development” that offered greater benefits than the “equivalence” agreements offered by the EU.
“It’s also the start of a journey,” he said. “The arrangements can be developed further over time and, if successful, could provide a model for future deals between other markets.”
