Theresa May bets that Barnier is bluffing in saying no to special access to financial services

Theresa May bets that Barnier is bluffing in saying no to special access to financial services


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Theresa May’s government is betting that Michel Barnier is bluffing when he says there will be no special deal for the City of London and its access to the Single Market.

Two senior British officials familiar with the matter told the Luxemburg Times that despite explicit statements to the contrary, Michel Barnier will allow UK-based banks to trade freely across the Single Market.

The calculation entails a considerable gambling appetite, given that the City employs 2,2 million people and accounts fro 11% of the UK’s GDP.

 In December 2017, the European Commission’s chief Brexit negotiator reiterated that there is no chance the UK will have access to the Single Market for financial services. While Brexit Secretary David Davies insists he can secure a “Canada plus-plus” deal, which includes financial services, European Commission circles insist that the only thing on offer is a “Canada dry” offer. UK officials claim that this is merely an opening position and Barnier will find he does not have the support of the 27 member states to hold this line.  

Negotiations on the future trade relation between the UK and the EU are expected to begin in March. Initiating trade talks required “sufficient progress” on a number of preconditions posed by the EU, including an agreement for London to pay a €44-to-49bn “divorce bill.”

The clock is ticking, as the UK is expected to leave the EU in March 2019, that is, 14 months away. Businesses count on a two-year transition period, which the UK requests and Brussels is willing to offer, which could be compromised by the concern of Brexit hardliners that the UK would be a rule-taker for two years.

The two year period assumes continued access to the Single Market with the preservation of the status quo, which means freedom of movement of labour, regular contributions to the EU budget, and no opportunity to implement any trade deal made outside the Custom’s Union.

Given the fear of disrupting service, a number of City behemoths have begun to create subsidiaries and timidly relocate branches and personnel to Frankfurt, Dublin, Paris, and Amsterdam. The move may accelerate as France is lobbying for the restriction of UK asset-management operations in the EU, the Financial Times report.

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