For the UK one of the big things about Brexit is that our major exporting industry is financial services. More specifically, it’s the City, wholesale financial services. Said City being by far the largest financial centre in Europe, orders of magnitude larger than anywhere else. It’s also one of the world’s largest such centres, in certain markets very much the largest.
We would, obviously, like to be able to keep doing this business. But the next set of the negotiations is an interesting example of people really not quite getting what happens in markets. That’s markets more generally, not just the financial ones. Who is it that benefits most in a market?
There’s a certain cod Marxism/socialism which insists that market transactions are rips off of the consumer. Rather too many of the rulers of Europe fall for the same mistake. Thus they’re talking about punishing Britain for the temerity of leaving the club by not allowing frictionless exports of those financial services.
Hmm, well, yes:
German asset managers have demanded “unhindered access” to financial services from London after Brexit in a boost to British calls to preserve open markets after the UK leaves the bloc.
The European Union has been adamant that any future free trade agreement between Britain and the EU cannot include financial services and has warned that Brexit will strip the sector of its “passporting rights” into the bloc.
Instead, Brussels has said that access will be governed by regulatory “equivalence”, a judgement made by the European Commission. Such decisions can be withdrawn unilaterally, with no appeal process, and on just 30 days notice, which robs business of certainty.
Those asset managers have worked it out. The consumer gains in a transaction. This must be so, obviously, otherwise they’d not hand over good money to make a transaction. But in financial services, well, they get financial services, don’t they? And so which is the more important thing, who loses more, if the EU cuts off the City. Is it the City, the producer? Or is it the businesses and peoples of Europe who are now denied access to the financial services they quite obviously desire?
Now run it again with the City being interested in but not dependent upon European business. And European business gaining some 70 to 80 % of its wholesale financial services from the City.
We’re worried about losing business more than they’re worried about losing finance, are we?