Kier Starmer is expected to exclude financial services in a drive for closer EU alignment, after the City pushed back on suggestions this week of tighter ties to Brussels rules.

In an interview with the BBC’s Laura Kuenssberg on Sunday, the prime minister said the UK should consider closer alignment with the EU single market “if it is in our national interest", prompting lobbying from banks and insurers, who argued that re-adopting EU frameworks could hinder growth and innovation.

Commenting on developments, Penny Miller, UK country head and partner, financial services regulatory at Simmons and Simmons, said: “Starmer’s commitment to closer co-operation with the EU, while maintaining the UK’s regulatory autonomy in financial services, has seen mixed views amongst our clients. It is quite a domestic view as global firms already comply with EU rules.

“Whilst the ability for UK and EU frameworks to co-exist sensibly is vital, the UK’s vision for a globally competitive regulatory environment should not be compromised by a return to a framework constrained by a need for wider alignment with the EU. We are also seeing this play out in UK domestic rules such as the Senior Managers’ Regime where there is a real hope across industry for simplification.”

Miller said a pragmatic approach was needed, in which the UK could continue to collaborate with EU counterparts without forcing the City to follow EU rules.

Such an approach would maintain clear and manageable domestic frameworks that support risk management and the competitiveness of UK financial services.

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