How Long Can May Last???

Politics & Elections
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The impact of hard Brexit is key. The ‘experts’ don’t seem to know, so your opinion seems as good as any other.

I fear it will be quite harsh. The simplest explanation for the government’s dissembling to date is that all the smart people involved within government fear the worst.

There’s much talk of a soft Brexit being unacceptable because it is clearly worse than full membership of the EU. Less talk about how a hard Brexit will be better. Typically, vague words about freedom to trade.

For this free trade to be better than membership of the EU, Britain would have to get better than WTO terms with countries that the EU doesn’t have agreements with (mainly America and China?), and/or better than EU terms with countries like Canada and Japan, so much so that it offsets the worsening of terms with the EU, on the small proportion of the British economy devoted to tradable goods and produce. Not obvious how that will work.

The EU is happy to accept any sensible free trade deal on goods and produce. It has a large surplus after all. But it literally cannot be better than a free trade deal (and all the frictions these involve) without full compliance with the single market’s rules for trade in goods and produce, including consequential constraints on trade with third parties. This is a dilemma for Britain, not for the EU. Hence the white paper’s futile ambiguity on this.

EU companies do need sophisticated financial services. It is naive to think these can only be provided within a few hundred metres of Leadenhall market. The global financial services companies can and will be delighted to offer them wherever they are required, for the usual fee. It is naive to think that any sophisticated economy will agree to give up is rights to regulate its own financial services industry. Never going to happen. The business will move to the EU, and all of the customers, providers and regulators involved will cooperate to minimise the cost. If the City wants to sell financial services abroad to anyone, it cannot afford to play hardball with the Europeans as they ‘take back control’.

So far as I know, Brexit won’t really change UK-based financial services companies’ ability to trade internationally, so no gains there.

All in my humble opinion of course. I have been entirely unsurprised by developments to date, but from here on, I think there is lots of scope for unexpected and unpredictable developments. We, the British, unfortunately do live in the most interesting of times!

62

I agree with a lot of what you’ve said, but not on financial services.

According to the Financial Times, a hard Brexit and loss of ‘passport rights’ to the EU would cost Deutsche Bank €10bn, and all EU banks €30bn-€40bn, as well being a major inconvenience. The costs to British banks would be a tiny fraction of that.

Also, $5tn worth of currency trades with a dollar component pass through London daily. This all goes through the CLS International Bank, regulated by the US Federal Reserve, located in London. There is no equivalent in the EU. Indirect access to this service by EU banks would raise the costs of processing for EU banks, with a particular impact for the large banks.

The FT concludes that “a harsh deal would hurt the EU’s financial sector more than the UK.”

My point is that there is a significant cost to EU’s the financial sector in breaking ties with the UK, and there are costs in many other sectors as well. This will ultimately force the EU to conclude a reasonable deal.

63

We just need to make Britain Great Again, we were at our most influential when we ruled the waves and had red-coated soldiers just marching around squishing natives all over the place, I reckon that’s a good start.

We should probably declare war on France too, get Brittany back.

64

Unfortunately the French, unlike the rest of Europe, have nukes.

65

The article is paywalled. I’ll see if I can find it from the hard copy in the library later.

The EU does not need to be forced to conclude a reasonable deal. Everything the EU has said so far has been sweetly reasonable. All the claims of bad faith made so far have just been the typical Brexiteer disengagement from reality.

I did not know that about CLS bank. It seems important. I wonder what the public reaction will be to the ECB regulating some market activity in London after Brexit!

I would also stress that repatriation of financial services into the EU could easily take a decade if necessary. The EU is both pragmatic and long-term in its thinking.

Aside - it feels funny talking about the EU in such positive terms. An example of the power of conditioning to affect how we think about the world. Tell a lie often enough and it becomes the truth, even to your opponents.

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“They’re on our side - I believe.” - T. Lehrer