The chief executive of the Financial Conduct Authority (FCA), Andrew Bailey, has said that restricting trade it not an ‘inevitable or necessary’ response to Brexit, while the EU’s chief Brexit negotiator has said ‘frictionless trade’ is not possible once the UK leaves
In a public speech, Bailey warned that Brexit ‘should not be conflated with whether or not to have open global financial markets and trade in financial services’, saying that the economic and financial cost of losing open markets ‘is too great to be justified’.
He denied that the financial services industry is involved in ‘special pleading’ for maintaining open markets.
‘Open markets in financial services, freedom of location and free trade are important to the functioning of the global economy.
‘Firms should be able to take their own decisions on where they locate, subject to appropriate regulatory arrangements being in place which preserve the public interest.
‘Authorities should not dictate the location of firms; rather, we should allow open markets to shape those choices, always subject to our public interest objectives.
‘There is ample evidence that open markets in financial services and free trade can exist safely without common detailed rules and shared regulatory institutions. Consistent outcomes of regulation are what matters,’ Bailey said.
However, in a speech yesterday to the EU’s European economic and social committee Michel Barnier, who is the EU Brexit negotiator, warned that ‘a trading relationship with a country that does not belong to the EU obviously involves friction’.
Barnier pointed out that third-country traders do not benefit from the same facilities as member states with regard to VAT returns and highlighted the ‘unique case’ of the border with Ireland with regard to animal imports.
Barnier cautioned that the UK could not opt for sector by sector participation in the single market in areas like financial services, saying ‘you cannot be half-in and half-out of the single market.’
He was also outspoken on the issue of ‘no deal’ for Brexit, which has been suggested by some UK politicians, saying this would worsen ‘the “lose-lose” situation which is bound to result from Brexit’.
Barnier said a ‘no deal’ options would mark a return to a ‘distant past’, where EU trade relations with the UK were based on World Trade Organisation rules. There would be customs duties of almost 10 % on vehicle imports, an average of 19 % for alcoholic beverages, and an average of 12% on lamb and also fish, for which the vast majority of British exports go to the EU.
Andrew Bailey’s speech is here.
Michel Barnier’s speech is here.
