Bad ‘deal’ for City is ominous sign of Brexit to come

by Luke Lythgoe | 01.11.2018

Theresa May has got a “tentative” deal to access European financial markets after Brexit, The Times and BBC reported this morning. Both Number 10 and Michel Barnier have denied a deal has been reached. But the alleged deal isn’t far off what people expect to emerge from the Brexit talks. Access won’t be as good as UK-based firms get now, and would turn our financial services sector into a rule-taker. This is the template for our future relationship with the EU across the board: loss of power and loss of prosperity.

The Times says the EU would guarantee UK companies access to European markets as long as our financial regulation remained broadly aligned with that of Europe. And neither side would be able to unilaterally deny market access without first going through independent arbitration and giving a notice period significantly longer than the current 30 days.

This “equivalence” relationship is not as good as the “passporting” arrangement we have as an EU member. Access could be withdrawn if either side changes its laws. And by the nature of the deal, the UK would have to follow the EU’s lead rather than the other way around. We could even see new rules made to cherry-pick business from London, to go along with the tax-breaks already being offered by other EU countries.

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That is bad for our financial services sector, which dwarfs its European competitors. It contributed £119 billion to the UK economy last year, 6.5% of total economic output, and provided 1.1 million jobs and over £60 billion in export revenues. The financial sector’s success is also crucial for the NHS and other public services – it provided £72 billion in tax in 2016/17, 11% of total government receipts.

Brexit will hit that revenue hard. Since the vote in 2016, banks have been making contingency plans to shift much of their business into the EU after Brexit. The deal reported today just confirms their assumptions.

Rule-taking is May’s plan for the rest of the economy too – and for our policing arrangements. The price of EU market access is accepting EU rules but without the voice we currently have at the EU’s top table.

We can expect more government concessions soon as it desperately struggles to get a deal. That  could include an extension to the 21-month transition period that is supposed to kick in after we quit. But we would have to pay billions for every extra year, according to an EU diplomatic note to European capitals seen by Buzzfeed News.

This is not “taking back control”.

This article was updated shortly after publication to take account of the government and EU’s denial that a deal has been reached. 

Edited by Hugo Dixon

2 Responses to “Bad ‘deal’ for City is ominous sign of Brexit to come”

  • You can hear those little brexiteer brains go “project fear, project fear!”. It is very likely that SS Great Britain will have to be beached to prevent foundering before those undereducated ideologists see what was standing naked right in front of their grubby faces all along. Sad!

  • Brexit will hit the city of London and the square mile ,via #Braindrain en mass,#Capitalflight ,#EU revoking,withdrawing the Passporting Rights Privileges of London .
    All the Talent pool,wealth assets,hedge funds will move abroad,global capitalists,investors have lost confidence in UK economy ,micro and macro.

    UK services sectors will collapse from Fintech,Finance,Banking,Insurance,Edtech,Legal,Tech,Design,Innovation,Automation,AI,Robotics and all.

    Canary Wharf will become a ghost town ,for squatters to occupy,possess the abandoned office buildings and river view plush flats and condominiums .