Europe remains the key to Britain’s future economic success

[bannork]

 Amid all the understandable euphoria about the UK-India free trade agreement and the Trump administration’s partial relaxation of tariffs on British exports, Andrew Bailey, governor of the Bank of England, has reminded the nation of a simple truth: that the European Union remains the closest and most valuable of all the UK’s economic relationships, and it must not be neglected.

Although he did not quantify the dynamics of the evolving situation, on any realistic assessment the added value to GDP of all the UK’s post-Brexit deals to date, including with Australia and the trans-Pacific partnership (covering Japan, South Korea, Indonesia and others in the region), will be about a quarter of the permanent losses indicated by leaving the EU.

But it has fallen to Sir Keir to deliver the Brexit “reset” he promised the British people at the last election: on 19 May an ambitious and perhaps historic recasting of relationships is to be unveiled at the next UK-EU summit, the detailed work of relaxing rules on trade, especially in foodstuffs, fisheries and livestock, promises to help hard-pressed British producers who have lost vital export markets in recent years.

Europe remains the key to Britain’s future economic success

[BLMFem]

Exactly. Some Brexiteers hail the trade deal with the US as a great success and a result of Brexit, but the sad truth is it's like setting your own house on fire and declaring victory because you managed to save the toaster.

[Cameroni]

Europe, following Brexit, could have completely destroyed the City of London as a viable financial market place, but instead showed major leniency, allowing equivalence of rules to prevail.

 

Why Frankfurt and Paris did not take the chance to destroy London as a competitor is a mystery.

[Cameroni]

Looks like it was France that saved the City of London, as they feared Germany more than the UK:

 

"The EU could have used its regulatory powers to shift the business inside its own borders, and kill a lucrative chunk of the City’s business. London’s rivals hoped that, once ‘clearing’ moved to a different city, there would be a powerful incentive for banks and brokers to follow suit. 

As it turns out, however, while some trades will have to be transferred to EU clearing houses, the bulk of them will be allowed to stay in London. The French, somewhat unexpectedly, sided with the UK because they were worried that, if the business moved, it would go to Frankfurt rather than Paris. That would make the German city, already home to the European Central Bank, the key hub for the whole of the continent. It turns out that France may well fear Germany more than it hates Brexit: even helping the British was better than allowing its neighbour to claim power over the bloc’s clearing houses. "

 

https://www.spectator.co.uk/article/the-city-of-london-has-france-to-thank-for-its-brexit-win/

[BLMFem]

37 minutes ago, Cameroni said:

Europe, following Brexit, could have completely destroyed the City of London as a viable financial market place, but instead showed major leniency, allowing equivalence of rules to prevail.

 

Why Frankfurt and Paris did not take the chance to destroy London as a competitor is a mystery.

I'm guessing because there were grown-ups present in both places that realized that Europe would be so much worse off with a financially destitute Britain, which would probably have been the case if London as a financial center would have collapsed.

[RayC]

32 minutes ago, Cameroni said:

Europe, following Brexit, could have completely destroyed the City of London as a viable financial market place, but instead showed major leniency, allowing equivalence of rules to prevail.

 

Why Frankfurt and Paris did not take the chance to destroy London as a competitor is a mystery.

 

I'm not sure whether the EU could have (or can) destroyed the City of London, and less convinced whether it would be in its' best interests to do so.

 

Financial services account for +/-10% of UK GDP, and the destruction of this sector would obviously severely damage the UK. Why would the EU welcome this outcome? They would have to deal with the effects of having a large failed state on its' doorstep.

 

An interesting academic discussion on the effects of Brexit on the City of London can be found here:

 

https://www.sciencedirect.com/science/article/pii/S2949694224000051#:~:text=The only significant financial power that the,shared with the EU was financial regulation.&text=Despite some relocations from London%2C Brexit has,to London as an international financial centre.

[bannork]

In 2023, the UK exported goods and services worth £348bn to the EU, 41.2 per cent of the UK total, the equivalent US number was £179.4bn or 21.2 per cent of total exports.

Goods exports to the EU remain below their pre-pandemic and Brexit levels, last year they were 18 per cent below the 2019 number in real (inflation-adjusted) terms. Brexiteers argued that exiting the EU would catalyse a flowering of trade with non-EU countries boasting whizzy fast-growing economies, such as those in South East Asia; however, exports of goods to non-EU countries in 2024 were also 14 per cent below their 2019 level in real terms.

Services have done better. Sales of these to both EU and non-EU countries fell in 2020 but have since bounced back. In 2024, UK exports of services to the EU were 19 per cent above their 2019 level in real terms, exports to non-EU countries were 23 per cent higher. 

Voices: If the UK is to grow, Labour must look towards the real trade prize

[candide]

1 hour ago, Cameroni said:

Looks like it was France that saved the City of London, as they feared Germany more than the UK:

 

"The EU could have used its regulatory powers to shift the business inside its own borders, and kill a lucrative chunk of the City’s business. London’s rivals hoped that, once ‘clearing’ moved to a different city, there would be a powerful incentive for banks and brokers to follow suit. 

As it turns out, however, while some trades will have to be transferred to EU clearing houses, the bulk of them will be allowed to stay in London. The French, somewhat unexpectedly, sided with the UK because they were worried that, if the business moved, it would go to Frankfurt rather than Paris. That would make the German city, already home to the European Central Bank, the key hub for the whole of the continent. It turns out that France may well fear Germany more than it hates Brexit: even helping the British was better than allowing its neighbour to claim power over the bloc’s clearing houses. "

 

https://www.spectator.co.uk/article/the-city-of-london-has-france-to-thank-for-its-brexit-win/

It's not the only (and main) explanation. There were also issues of higher cost for banks, lack of choice for bank customers, and regulatory supervision.

Here's the Politico article cited by the Spectator as source.

https://www.politico.eu/article/france-helped-britain-keep-euro-clearing-london-brexit/

 

Interestingly enough, the current policy is set to expire in June 2025, which may partially explain Starmer's alacrity.

[Cameroni]

4 hours ago, candide said:

It's not the only (and main) explanation. There were also issues of higher cost for banks, lack of choice for bank customers, and regulatory supervision.

 

Indeed. It looks like the German regulators' abysmal past performance scared off the French, quite rightly. But the biggest reason appears to have been that neither the French nor the German banks wanted to stop using UK clearing houses, ostensibly due to cost, but those banks are so intertwined with London, many of their main personnell would have worked in London, that they saw no point in castrating the City.

 

It would have required someone like Trump, to push through the reform required, or else the interested parties water down the intended policies to suit themselves.

 

Of course the EU can always pull the trigger on this in the future, and in any event settlement is not the only City of London slice of business the EU could take.

 

People who say regulation doesn't matter, don't know the history of the Eurobond. It matters a lot.

[Cameroni]

5 hours ago, RayC said:

 

I'm not sure whether the EU could have (or can) destroyed the City of London, and less convinced whether it would be in its' best interests to do so.

 

Financial services account for +/-10% of UK GDP, and the destruction of this sector would obviously severely damage the UK. Why would the EU welcome this outcome? They would have to deal with the effects of having a large failed state on its' doorstep.

 

An interesting academic discussion on the effects of Brexit on the City of London can be found here:

 

https://www.sciencedirect.com/science/article/pii/S2949694224000051#:~:text=The only significant financial power that the,shared with the EU was financial regulation.&text=Despite some relocations from London%2C Brexit has,to London as an international financial centre.

 

The EU could have taken away most of the City of London's business, had it wanted to do so. Clearly it would be in Frankfurt's interest to establish itself above the City of London as Europe's main financial market place. 

 

The UK looks more and more like a failed state anyway, but the loss of the financial services sector would not be mortal, the UK has pharma and many other sectors still for a prolonged decrepit decline.

 

The UK's decline would not affect the EU all that much.

 

The EU could regulate away a lot of the City's business, and they can still do so in the future, if they ever decide to do it.

[cjinchiangrai]

Duh!

[frank83628]

6 hours ago, bannork said:

 Amid all the understandable euphoria about the UK-India free trade agreement and the Trump administration’s partial relaxation of tariffs on British exports, Andrew Bailey, governor of the Bank of England, has reminded the nation of a simple truth: that the European Union remains the closest and most valuable of all the UK’s economic relationships, and it must not be neglected.

Although he did not quantify the dynamics of the evolving situation, on any realistic assessment the added value to GDP of all the UK’s post-Brexit deals to date, including with Australia and the trans-Pacific partnership (covering Japan, South Korea, Indonesia and others in the region), will be about a quarter of the permanent losses indicated by leaving the EU.

But it has fallen to Sir Keir to deliver the Brexit “reset” he promised the British people at the last election: on 19 May an ambitious and perhaps historic recasting of relationships is to be unveiled at the next UK-EU summit, the detailed work of relaxing rules on trade, especially in foodstuffs, fisheries and livestock, promises to help hard-pressed British producers who have lost vital export markets in recent years.

Europe remains the key to Britain’s future economic success

They won at 34%, the lowest win ever recorded, His brexit reset will be the reason he loses very soon.