The Prime Minister and BoE governor called on Britain to rebuild relations with the EU

Prime Minister Rachel Reeves and Bank of England Governor Andrew Bailey have joined forces to call for Britain to rebuild relations with the EU, amid fears of a possible transatlantic trade war with the president-elect America Donald Trump.

In a highly unusual move, both Reeves and Bailey used keynote speeches at the annual Mansion House dinner on Thursday to warn of the economic damage caused by Brexit and the need for reforms. Improve trade links with the EU.

“We face structural challenges, including those that come from Brexit,” Reeves told the bigwigs of the City of London. “We will not reverse Brexit or rejoin the single market or customs union but we must reset our relationship.”

Governor of BoE highlights the drag on the UK’s potential growth from trade barriers with the EU created by Brexit.

“The impact on trade appears to be more focused on goods than services,” he said. “But it underlines why we must be vigilant and welcome opportunities to rebuild relations while respecting the decisions of the British people.”

Bailey did not mention Trump directly but said: “The picture is currently clouded by the impact of geopolitical shocks and the broader fragmentation of the world economy.”

The joint intervention comes as Prime Minister Sir Keir Starmer prepares to negotiate improved UK trading terms with the EU next year, including a veterinary agreement to improve food flows and mutual recognition of professional qualifications.

Reeves hopes Trump won’t see through his threat US global tariffs imposed on trading partners and said she would continue to support “free and open trade.”

But the prospect of Britain simultaneously facing hampered trade with the EU and the US would be a serious setback.

The Prime Minister called the United States “our most important destination for financial services trade” and said that “there is great potential for us to deepen our economic relationship in areas such as emerging technology”.

Meanwhile, Reeves asked City regulators to reduce risks in the UK’s financial services sector, claiming that the rules were introduced after the 2008 banking collapse has “gone too far” and is stifling growth.

She said she wanted financial services to drive growth and send a clear message to watchdogs: “The UK has managed risk, but not managed growth.”

After coming under harsh criticism from Britain’s business world following a £40 billion tax increase, the prime minister sought to reassure executives that she has a growth strategy. Her speech covered a series of financial services reforms, especially in pension sector.

Reeves on Thursday sent “forward” letters to the City’s five major governing agencies, asking them to focus on growth.

She argued that while the UK would continue to maintain high standards, the regulatory system’s efforts to remove risk were holding back the economy.

“It has gone too far and, in some places, has had unintended consequences that we must address now,” she said. Trump’s successful campaign pitch also included a promise to deregulate America.

Reeves’ allies claim the UK’s financial services are in a much stronger position than before the 2008 crisis and the prime minister is “willing to take more risk”.

She had specific concerns about the burden placed on bank staff below senior management level by the regulatory certification regime.

Under the regime, banks are required to conduct mass vetting of staff in risk-taking positions to ensure they are suitable for their roles and record them on a public register.

The Prime Minister said the government would consult on a new system with a “more tailored approach that reduces costs so businesses are free to focus on growth”.

Lawyers expect the regime to be narrowed to cover fewer people with lighter reporting requirements.

Regulators at the Financial Conduct Authority and the BoE’s Prudential Regulation Authority have responded to political calls to support growth by scaling back some post-2008 rules, removing the limit banker bonuses and reduce Basel capital requirements regulations for this sector.

Some regulatory experts argue that political pressure on supervisors to promote growth risks conflicting with their primary goal of maintaining a safe and stable financial system.

Romin Dabir, financial management partner at law firm Reed Smith, said watchdogs risk being “stuck between a rock and a hard place”.

Dabir added it is likely that when the next financial scandal occurs, politicians will criticize regulators “for falling asleep behind the wheel”.

Reeves also announced other reforms, including the establishment digital sowmodernization consumer compensation in the financial services sector and advise on the new framework for Compulsory insurance Companies and organizations established by businesses to self-insure their risks.

The Prime Minister also promised a “financial services growth and competitiveness strategy” next year, focusing on five main areas: fintech, sustainable finance, asset management and wholesale services, insurance and reinsurance, and capital markets.

Additional reporting by Ian Smith in London