Another day, another development in Brexit negotiations. But this time it’s a big one for the City and one that’s likely to prove the key battleground in trade negotiations with the European Union (EU) in the coming year.
And as fed up as we might be with Brexit, there’s no escaping it. Not unless the decision to leave the EU is reversed — a remote possibility, admittedly, but one that can’t be ruled out in the current peculiar climate.
Last week we found ourselves the victims – yes victims – of a charm offensive by the French. President Macron offered Britain a loan of the Bayeux Tapestry in an outward sign of friendship that was hailed as a stunning victory of diplomacy.
He also pushed at an open door for more British funding for border controls at Calais.
And then he demanded, very politely, that Britain cough up for continued membership of the Single Market.
Given the British government’s Brexit position this might seem a bit daft. Prime Minister Theresa May has stated repeatedly that Brexit means Brexit.
But France’s very clear position is that if Britain wants to continue to provide services to Europe it will have to do so through the Single Market and will have to pay to play.
In that sense, President Macron’s offer of a loan of the Bayeux Tapestry could be viewed an example of epic trolling.
The embroidery – it’s not technically a tapestry – depicts one of the great French, or if you like European, victories on British soil.
But the symbolism is clear enough. We beat you before, and now that the battle lines have been drawn, we’ll beat you again.
In short, President Macron is prepared for battle, knows he is in a strong position and intends to win.
Britain’s economy is almost 80% reliant on services. A quick glance at the UK’s trade balance data shows how reliant Britain is on exporting those services to Europe and the rest of the world.
Britain’s trade deficit in goods with the rest of the world is a yawning chasm that would dwarf the Grand Canyon.
Its overall trade deficit with the rest of the world is only offset by the massive trade surplus it enjoys in the provision of services worldwide.
We have known for at least 20 years that our economy is horrifically out of balance and that it is overly reliant on services — but have done little about it.
And the largest provider of services? The City, of course. Financial services in the UK employs 1.1 million people. In 2016, it contributed £124.2 billion to the UK economy, 51 per cent of which came from the City.
The demand that Britain essentially remains in the single market will also mean British companies remaining subject to the jurisdiction of the European Court of Justice (ECJ).
That begs the question, what is the point in leaving in the first place?
Whatever your view of Brexit, securing a deal for the City is vital for Britain and its economy. The French President made clear last week that he knows this, and with German chancellor Angela Merkel busy at home fighting for her political future, he intends to exploit this weakness – for it is a weakness – for all its worth.
The opening salvo in trade negotiations have most definitely been fired.
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