#Brexit Is Done, but the Deal-Making Isn’t…and Finance Is at the Heart of It

#Brexit Is Done, but the Deal-Making Isn’t…and Finance Is at the Heart of It

By Chris Skinner
Originally published at Chris Skinner’s blog, The Finanser

I was going to give up writing anything further on Brexit as it’s now done and dusted. Britain’s out of Europe. There was no major celebration however. I was in London last Friday night, and this is what I saw out of my hotel window as we exited.

Yep. Nothing. Nada. Zilch. You would think after half a century we would have seen some fireworks or at least a rocket shoot into the sky, but instead there was nothing. Not even bung a bob for a Big Ben bong succeeded. And a day later, nothing much had changed either. I guess it won’t until the trade negotiations kick in, and things kicked off with a good debate last week when Ireland’s Taoiseach Leo Varadkar told the BBC:

“The U.K. has a lot of waters and a lot of fish is taken out of your waters by boats from other countries. But bear in mind that 70 per cent of the fish you sell, you sell into Europe. That’s an area where you are in a strong position. An area where you’re in a very weak position is one of the most valuable parts of the British economy — financial services. You may have to make concessions in areas like fishing in order to get concessions from us in areas like financial services. That’s why things tend to be all in the one package.”

Ah yes. We have to give up fish for finance. I’m sure our fisher folk will love that.

In October last year, this policy clash was highlighted as one of the priority areas for the negotiators to resolve in the E.U. Political Declaration which outlined the framework for the future relationship between the European Union and Great Britain. Point 36 of the declaration states that:

“Both Parties will have equivalence frameworks in place that allow them to declare a third country’s regulatory and supervisory regimes equivalent for relevant purposes, the Parties should start assessing equivalence with respect to each other under these frameworks as soon as possible after the United Kingdom’s withdrawal from the Union, endeavouring to conclude these assessments before the end of June 2020. The Parties will keep their respective equivalence frameworks under review.”

So, TeamGB thinks it can continue passporting around the European Union using equivalence but, meantime, has refused to give Brussels any views on access to Britain’s coastal waters, where more than 700,000 tonnes of fish are caught each year by EU boats. I kind of think there’s going to be a real tit-for-tat deal making being done for the next year and there’s a few trump cards that can be played. The strongest being fishing and finance.

In 2018, the financial services sector contributed £132 billion to the U.K. economy, 6.9% of total economic output, whilst fishing contributed £1.4 billion, or just 0.1% of total output.

And these are just two big areas to negotiate – there are over 600 international agreements that we need to agree in the next 11 months – but, going back to the Taoiseach, Mr. Varadkar did add:

“If you see this as a contest, the E.U. is in a very strong position . . . But I don’t think we have to see it as a contest. There is a possibility for us to work together with the UK over the next few months and come to a future relationship and a trade agreement that’s mutually beneficial.”

I guess this is why Brexit might be done, but Brexit Twitter will rage on.

Originally published at Chris Skinner’s blog, The Finanser

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