As appetite for a thin EU trade deal grows, the City has the most to lose

Linda J. Dodson

Indeed, there is a sense in which politically it is no longer particularly important what is agreed, so long as it is something. It is not the substance, but seemingly the public relations fanfare of an agreement that has become the bigger political goal. To be in an ongoing fight over trade with your geographically closest ally would seem in current circumstances to be most unwise. Being seen to make up is imperative in the context of our bombed out, post-lockdown economies.

The stars, then, may finally be aligning, but only around an agreement of quite limited ambition. Nowhere is this more apparent than in what becomes of Britain’s most important, lucrative and tax generative industry – financial services.

The City has arguably gained more from unfettered access to Europe’s single market than any other sector, so potentially also has the most to lose from a poorly executed trade deal that fails adequately to take its interests into account.

There is a distinction to be made here between “the City” as a national asset, and the mainly foreign owned players that make it up. Most of these participants are individually agnostic on what happens. They would obviously prefer the status quo, but have already restructured in preparation for less benign outcomes. It would not be helpful to them if the City splintered, but it would be manageable. The big loser would be the UK economy, and, by extension, the Exchequer, not them.

The UK began with a “cake and eat it” approach to defending the economic interests of the City, aiming for a deal that would preserve as much as possible of the City of London’s role as Europe’s premier financial centre.

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