- This event has passed.
Trade and Financial Markets Post-Brexit. What next?
19 February, 9:00 am – 12:00 pm
Officially the UK Government and the European Commission enter the coming negotiations post-Brexit in a spirit of mutual respect and with the ambition to maintain a close relationship between Europe and the UK, although obviously not as close as before. However, both the UK and the EU have expressed preconditions that may put those aspirations in doubt and make them difficult to meet. This conference aims at exploring the different possible outcomes of the complex negotiations and especially the short-term and long-term consequences of the alternatives for the financial markets and the City.
Organiser and overall chair: Dr Ulf Dahlsten, Visiting Professor in Practice
Key note speech: Stefaan de Rynck, Senior Advisor to the Head of the Task Force for relations with the United Kingdom Michel Barnier, European Commission.
Comments: Representative of the Her Majesty’s Government (to be confirmed)
Deal on financial markets
The open financial markets and the free flow of capital are an integral part of the single market that also includes the free movement of people, a freedom the UK wants to restrict. Financial services are special in the sense that a future agreement would cover these services in terms of regulatory cooperation but not in terms of market access. Equivalence decisions from the EU are indeed possible but these are unilateral EU decisions, which are not negotiated with the UK. Equivalence presupposes regulatory convergence, which would appear to be at odds with the plans for post-Brexit light touch regulation, which some financial sector operators advocate. . It’s also important to bear in mind that only very few equivalence decisions give market access. This means under all circumstances – even if the equivalence concept is applied in several areas – that the situation will be very different at the end of the transition period and most UK firms (and vice versa) will no longer enjoy access to the single market and passporting rights. Of course, firms could still access the market of individual member states based on the relevant third country rules, but this would not lead to a passport. Against this background, how likely is it that the UK will be allowed to cherry-pick and remain part of the single financial market whilst outside most other aspects of the single market? Is the City sentiment of “business as usual” following Brexit due to the fact that many financial actors already have established another hub in the EU to manage their EU business? And, if so, how will that affect the UK tax base and the UK economy? The income from financial services is after all the single largest contributor to the UK GDP.
- Gideon Rachman, Chief Foreign affairs Commentator, Financial Times
- Charles Goodhart, senior professor, Financial Market Group, LSE
- Warwick Lightfoot, Head of Economics and Social Policy, Policy Exchange (to be confirmed)
Trade deal on goods and deal on fishery
The EU has declared that they want a free trade agreement on goods with zero tariffs and zero quotas. Importantly for the EU, this needs to be coupled with horizontally applicable so called level playing field commitments (paragraph 77 of the Political Declaration). This means that the U.K. commits to keeping high standards on food safety, environment, labour rights, state aid etc. This does not preclude that the UK in order to get a fast deal with the US accepts lower standards for imports of products from the US for its own market, but products exported to the EU must always comply with EU rules on product safety, sanitary rules etc. How will UK farmers and manufacturers react to a situation in which they have to compete with US products of lower standard while they themselves are forced to live up to the higher EU standards? Is this a tenable situation?
Or is the directive from the PM that UK should prepare for customs and border controls more than negotiation tactics and aimed at lowering the UK standards to the US level to enable a closer relationship with the US than with the EU?
And how about the fishing rights? Are they going to be retained?
- Martin Sandbu, economic commentator, Financial Times
- Professor Alan Winters, Director of the Trade Policy Observatory
- Nick von Westenholz, Director, EU Exit and International Trade, National Farmers Union
The timetable and negotiations in good faith
The UK Government has secured a mandate by the Parliament not to demand prolongation of the transition period and to definitely leave in one year’s time, without a trade deal if need be. A trade deal to be finalized during 2020 would in practice have required the UK to more or less completely accept the EU standards, which given the campaign rhetoric not seems likely to happen. Is the campaign rhetoric history or are the negotiations just a “smoke-screen” for a planned Hard Brexit? And what will a Hard Brexit mean for the City?
The EU Commission has also pointed out that creating a partnership covering all areas in the Political Declaration will take time. The issues concern everything from fisheries to landing rights for airlines. How will those relations be affected by a potential economic cliff-edge at the end of the transition period, in case the new partnership is not yet in place? The Brexit ambition of some to make the UK a “Singapore on Thames” could also have consequences for the future cooperation on for example tax evasion. Could that create bad feelings in EU countries and difficulties in other negotiations?
- Dr Ulf Dahlsten, Visiting Professor in Practice
- Vince Cable, former Leader of the Liberal Democrat Party and Visiting Professor in Practice, LSE
- Deputy Head of Mission Ms Julia Gross, Deputy Head of Mission, German Embassy