The Finance & Leasing Association’s head of Government, Edward Simpson, looks back at 2020 and assesses developments from across The Channel as Brexit negotiation remain far from resolved ahead of Christmas.

I had hoped to be writing about the dénouement of the Brexit negotiations as we bid good riddance to 2020 but whatever I write today may well be out of date by the time you read this. Instead, I’ll focus on some of the year’s highlights at a European level.

The first full year of a new European Commission term is always a frenzy of activity and this one was no different. As with everywhere else, best laid plans were torn up to focus on mitigating the impact of Covid-19.

After some push back from the northern EU Member States, a recovery fund worth €750 billion was agreed to the benefit primarily of the hardest hit economies of Italy and Spain.

At the same time, the EU-27 agreed on the general budget through to 2027 which prioritised green investment. The UK Government took a different approach. It delayed its four- to five-year Comprehensive Spending Review and opted for announcements that covered the next twelve months. This included £100 billion of expenditure to address ‘levelling up’ and significant support for a ‘Green Industrial Revolution’. To help progress the Government’s net-zero plans, the FLA has with other trade bodies, suggested a Green Finance Guarantee, to support the wide rollout of low emissions vehicles to households, so we would like to see a forward-looking dimension to the Government’s approach.

Meanwhile, the Commission has published plans to take on big tech. The Digital Services Act aims to clamp down on illegal content or the sale of illegal goods. The focus of the Digital Markets Act is to tackle unfair practices by the major providers of the core platform services most prone to unfair practices, such as search engines and social networks. The Act comes with stringent penalties for non-compliance, including fines of up to 10% of the ‘gatekeeper’s’ worldwide turnover.

These proposals will initiate years of complex negotiations as consumer and privacy representatives seek to curb the lobbying might of the big tech companies. According to UK press reports this week, Facebook will join Google in transferring UK user agreements away from the EU to the US. Clearly, this spells a shift to an independent approach. Similarly, the UK has introduced a 2% digital services tax, lower than the 3% tariff imposed in France, which the Commission has put forward as a basis for the EU-27.

Last month, the New Consumer Agenda set out an ambitious vision of a Europe that benefits consumers. The Department for Business, Energy and Industrial Strategy’s plans to issues a Consumer White Paper this Autumn have been delayed but it will be interesting to see whether this provides inspiration to UK regulators and outcomes coincide.

These respective EU and UK initiatives illustrate an interesting new dynamic. Is there a creative tension developing between the EU and the UK to be the first to be progressive and innovate? Or are they seeking to protect their own markets? Or both? In practical terms in the FLA markets, we might then ask whether it will be the EU that acts first to reform the Consumer Credit Directive, or the UK to reform the Consumer Credit Act. Or perhaps whether the UK and EU will adopt divergent approaches on capital requirements for lenders. Time will tell.

This article first appeared in the FLA website on 17 December.