Keir Starmer has set a clear boundary for the UK’s “reset” with the European Union, ruling out the inclusion of financial services regulatory alignment in future talks.
The decision, reported in the UK press, narrows the scope of any wider rapprochement and signals that the City of London will remain outside the areas where the government may contemplate closer rulebook co-ordination with Brussels.
The clarification follows comments by the Prime Minister indicating that the UK could consider closer single market alignment “issue by issue” where it suited the national interest. Those remarks prompted concern within parts of the financial sector about whether the government might seek to bring elements of UK regulation back towards EU standards as part of a broader package of improved trade co-operation.
According to the Financial Times, officials said financial services would be excluded from any push for closer alignment, after lobbying by City firms against a return to Brussels rules. The report described the sector as accounting for about 9 per cent of UK GDP and employing roughly 1.1 million people. The Guardian similarly reported that financial services would not be part of future talks on alignment and that the government did not intend to reintegrate UK financial firms into EU regulatory frameworks.
In practical terms, “alignment” would mean the UK adopting, or closely tracking, EU rules and supervisory approaches in defined areas. For financial services, that could range from capital requirements and conduct rules to market infrastructure and disclosure regimes. Since Brexit, the UK has pursued changes aimed at tailoring regulation to domestic priorities, including reforms to listing rules and other measures framed by ministers as improving competitiveness.
The reports also describe industry concerns about uncertainty. Executives cited in the coverage argued that reopening the question of whether the UK might converge back towards EU rules could complicate business planning and reduce the flexibility created by the post-Brexit settlement.
The EU, for its part, has relied largely on a system of “equivalence” decisions to manage cross-border market access in specific areas, rather than recreating broad mutual access akin to pre-Brexit “passporting”. One of the most significant decisions concerns central clearing: in January 2025, the European Commission extended time-limited equivalence for UK central counterparties until 30 June 2028, citing financial stability and the need to give market participants clarity. That approach underlines a broader point: even without a new political bargain, parts of the EU-UK financial relationship continue through targeted decisions designed to manage risk.
There is also an established channel for dialogue. The UK and EU signed a memorandum of understanding on regulatory co-operation in financial services in June 2023, creating the Joint EU-UK Financial Regulatory Forum as a structured venue for discussions between the European Commission and HM Government. The European Commission’s finance directorate lists a series of forum meetings and joint statements, indicating continuing technical engagement even in the absence of closer legal alignment.
Starmer’s decision therefore does not imply a freeze in contact. It signals, rather, that the government is not seeking a formal bargain that would trade broader EU access for acceptance of the EU rulebook in finance. The distinction matters because it separates co-operation and information-sharing from commitments that would constrain domestic regulatory choices.
The timing is also significant because 2026 is due to bring a general review of the UK-EU Trade and Cooperation Agreement. The House of Commons Library notes that the TCA contains a review provision five years after entry into force, with the 2026 process potentially coinciding with further steps in the “reset”. That review will provide a formal moment for both sides to assess the operation of the post-Brexit framework across trade and related areas, even if finance remains largely outside the agreement’s core market-access architecture.
For the government, excluding financial services alignment may also be intended to make clearer where alignment could still be on the table. The Financial Times report indicated that the government might contemplate alignment in areas such as food standards as part of efforts to ease trade friction. In that sense, the position on finance delineates a boundary: the reset may focus on goods trade, regulatory co-operation in specific sectors, and practical arrangements where both sides judge the benefits to outweigh the political cost.
For Brussels, the stance is consistent with the EU’s preference since Brexit to avoid sector-by-sector access arrangements that resemble membership benefits without membership obligations. It also leaves the UK financial sector in the existing posture: access shaped by firm-level structuring decisions, limited equivalence in specific activities, and periodic political scrutiny when either side changes its rules.
The immediate consequence is that the UK’s EU policy can pursue closer arrangements elsewhere without reopening the question of whether the City should be drawn back towards EU regulation. The longer-term test will come as the 2026 TCA review approaches, and as the government seeks to define what, beyond improved political relations, the reset delivers in concrete legal and commercial terms.
