[...] This combination of British flexibility with European scale is obviously a powerful one. Although I sometimes read that the City is “drowning” or “suffocating” in regulation, London seems to be in fairly rude health. Over the past decade, the surplus from Britain’s trade in financial services more than doubled, from £23 billion in 2004 to £58 billion in 2014. And last year, once again, London was rated by the Global Financial Centres Index as the world’s most competitive financial centre. So under the present set-up, something seems to be going okay.
For a country such as Britain with great strengths in financial services, being part of the single market is a huge advantage. Passporting, whereby any financial service business established in one EU country can do business in all 28, is one of the reasons that the British fund management industry can look after a big chunk of the €8 trillion (£6.24 trillion) market in Europe’s globally successful investment product, Ucits [Undertakings for collective investments in transferable securities].
Being part of the single market has helped UK banks lend some £1 trillion and take nearly £1 trillion in deposits from across the EU.
It means British insurance groups running businesses across Europe are not faced with the difficult equivalence assessments process which third countries have to pass.
What if Britain left the EU? Would the City do any better than it already is doing? First, everything would be up for negotiation, meaning cost and uncertainty — the enemy of investment.
But second, countries outside the EU have to meet the standards of the EU to do business here. So either Britain would, like Norway, have to accept free movement and pay to get proper access to the single market, and still have to follow EU rules over which it would then have no say.
Or the UK would have to ask the EU countries to have our rules recognised as being equivalent to theirs, and even then businesses such as banks and insurance would have to set up a separate base in the EU to do business there.
Some claim it would be in the interests of the EU to come up with rules that suited the UK. Well, countries such as Germany and France have very different financial sectors from the UK. Their preoccupations are therefore different. Today, financial rules in the EU reflect this variety. But if Britain left the EU why would this continue to be the case?
Why should other countries, pursuing their own interests, use political capital defending Britain’s — assuming they didn’t want to seize the opportunity of our absence to gain a competitive advantage? It would be ironic if, in the name of gaining more control, Britain ended up having to sign up to rules over which it had no control at all.
As a European Commissioner I meet lots of British business leaders. The great majority do not seem to think that Britain faces a choice between trading with Europe or trading with the rest of the world. They know that Germany, at the heart of the EU, is the world’s third-largest exporter. They can see that far from being held back by the EU, the City of London has risen to become the world’s strongest financial centre. [...]
One thing is certain, however. Outside, Britain would not be able to maintain access to the single market on the terms it has at present. And to be certain of access, businesses would start to think about moving elsewhere in Europe to set up.
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