Thursday, February 28, 2019

The Cost to the City if Brexit is Stolen

As things stand, the UK will leave the EU on 29th March.

If Brexit is stolen (and make no mistake, any delay is simply an attempt to reverse the referendum), we will lose the opportunity to supercharge and reinvigorate the industry.

Benefits that Brexit brings us and we will lose if Brexit is overturned include...

  1. We will lose the opportunity for better, lighter regulation
    Outside of the EU the City will be able to repeal, revise and avoid regulation that currently makes us less competitive and unnecessarily increases costs.

    We have already seen MiFID2 drive business from the UK to the US due to the excessive administrative costs it has created. We will lose the the ability to address this.

  2. We will lose our commodities markets
    The EU is requesting that the UK charges VAT on commodity derivatives. We are currently being sued by the EU for not imposing this tax, with (of course) the ECJ adjudicating.

    If Brexit if overturned (or worse, we are stuck with May's Withdrawal Agreement - no voice, veto or vote) the UK will be expected to charge VAT in an environment that is already seeing spreads narrow and margins fall. We will lose this business to the US and Asia.

  3. We will lose tax-free transactions
    The Financial Transaction Tax is something our government has vetoed several times before. It was first put forward by the European Commission in 2013.  The idea was revived in December 2017 as a pet project of French Finance Minister Bruno Le Maire  and raised yet again by French President Emmanuel Macron in July 2018.

    More recently Olaf Sholz, German Finance Minister, called for a FTT in a speech in November 2018 (the same speech in which he is reported to have called for France to relinquish its UN seat to the EU, a Eurozone budget and an EU army).

    As a reminder of the potential impact, in the 1980s the Swedish government introduced a series of financial transaction taxes with the end result being that by the end of that decade more than 50% of all Swedish trading had moved to London.

    Within the EU we will lose the ability to resist this.

  4. We will lose Euro Clearing (and jobs)
    The ECB has attempted to prevent Euro clearing outside of the Eurozone on several occasions before. The UK won its case against the ECB's last attempt on a technicality and the court went to great lengths to show the ECB how to fix that technicality.

    We will lose the ability to clear euros (and with it thousands of jobs) within the UK, unless...

  5. We could lose Sterling and be forced to adopt the Euro
    Whether or not you believe the story from Frankfurter Allgemeine that EU officials have discussed plans to force all EU members to join the euro by 2025, Roberto Gualtieri, the Italian MEP and member of the European Parliament's Brexit Negotiation Team, confirmed the general ambition in an interview with Andrew Neil in 2017.

    In this context, it is important to note that non-Eurozone EU nations, voting as a bloc, currently have an effective veto on new European Banking Authority (EBA). This will disappear when the non-Eurozone states fall to four, which now seems likely to happen within the next five to ten years. At that point Britain would lose whatever residual defence it currently has and would be forced to adhere to regulations designed for the benefit of the Euro.

    Given the unsustainability of such a scenario, we would once again be faced with an existential binary choice: join the Euro, or leave the EU. This time however, since we would have had to revoke Article 50 on an "unequivocal and unconditional" basis to get to this point, we would be at the mercy of the ECJ who would decide if we could attempt to leave a second time.




1 comment:

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