UK financial services is now a clear EU target

There is only one way to sum up the shake-up in the European Commission portfolios from a UK perspective - we were totally stuffed.

We lost out lock, stock and barrel, leaving the UK financial services sector looking very exposed to attack from those who believe that its free-market 'Anglo-Saxon' approach to regulation and market behavior lies at the heart of the financial crises of the last two years.The upshot of the government's mishandling of the discussions about the distribution of key EC portfolios is that the UK is in the weakest position in the EU since it joined in 1973.

It all started with the misguided promotion of Tony Blair as a candidate for the new post of permanent president of the commission. A survey of the European press will show all too clearly that the only people who took this seriously were 10 Downing Street and the Daily Mail - it was a non-starter as far as the rest of Europe was concerned.

Having woken up late in the day to the fact that the Blair campaign was doomed to failure, Gordon Brown then focussed on the other new post covering foreign affairs. There was a false start with the attempt to put forward David Milliband as a candidate but he had the sense to see that this was potentially a political backwater and refused to have anything to do with it.

But the UK government had convinced itself that this was a deserved consolation prize for not getting the presidency and was being encouraged in this thinking by France and Germany. So, step forward Lady Ashton whose best qualification for the job seems to be that she has taken a few foreign holidays.

Having sold the UK a pup, the French and Germans then had the field to themselves in carving up the key economic portfolios and so Frenchman Michel Barnier ended up in the internal market and financial services beat with a clear mandate to focus on the City of London. The Germans wanted, and got, energy.

Lining up alongside Barnier in the other economic portfolios will be two liberals - Finland's Olli Rhen (trade) and Karel de Gucht of Belgium (economic and financial affairs) - neither of whom can be expected to be slow in supporting tougher regulation of financial markets. To complete this gloomy picture is the appointment of a Spanish socialist - Joaquin Almunia - as competition commissioner.

It looks as if the UK's financial services sector will have to look outside the Commission for support and is likely to find itself increasingly reliant on the European Parliament to get its voice heard which will make the role of UK Liberal Democrat MEP Sharon Bowles even more important to the City than it was before. She chairs the parliament's economic and monetary affairs committee which has to approve any Commission proposals on financial regulation before they can be passed into EU law. In her few months in the post she has proved a safe and sensible pair of hands when it comes to the rushed attempts to force through new regulations on hedge funds. I imagine quite a few public affairs departments in the City will be looking her up this week.

David Worsfold is group editorial services director at Incisive Media