Rule maker or rule taker? Brexit,finance and UK regulatory autonomy

Abstract

Given the integration of the City of London into the single market for financial services in the European Union (EU), theories of transnational governance would expect the United Kingdom (UK) to favour close regulatory alignment with the EU27 post-Brexit to maximise market access and financial stability. Surprisingly, however, the UK has consistently demanded regulatory flexibility in financial services and has accepted reduced market access. We argue that the explanation is twofold. First, UK preferences reflect the need to balance the competing demands of elected officials, the financial industry and financial regulators. Second, drawing on a bureaucratic politics perspective, we suggest that UK preferences have been strongly shaped by the importance to UK regulators of retaining autonomy over high-status policy competences. This article contributes to the broader literature on the politics of financial regulation by highlighting the added value of incorporating a bureaucratic politics perspective when explaining financial regulatory preferences.