Earlier this month, Bank of England Governor Andrew Bailey said the City of London shouldn’t expect the EU to open the doors to UK financial services exports after Brexit. He said at a press conference, “In terms of equivalence, I think it’s fair to say that nothing has really moved forward.” After months of tense negotiations, new trading rules were finally agreed at the end of December.
However, in a 1,200-page document very little talked about financial services: a sector that accounts for seven percent of the UK economy and ten percent of its tax revenue.
Without this recognition, London companies will be denied access to the market.
The EU’s intransigence comes as no great surprise, as since the UK decided to leave the bloc, major European capitals like Paris or Frankfurt have tried to take the city’s place as Europe’s financial center.
The French sent permanent delegations to London to tour the boardrooms, while Frankfurt set up special schools for all moving banking families.
Even before Brexit, France tried to sideline London.
In 2012, former Bank of France Governor Christian Noyer said London had stripped and marginalized its status as Europe’s main financial center so that the Eurozone could “control” transactions within the bloc.
Mr. Noyer told the Financial Times that there was “no reason” for the euro zone financial center to be “offshore”.
He said: “Most of the euro business should be done within the euro area. It is tied to the central bank’s ability to provide liquidity and ensure oversight of its own currency.
“We are not against some business being done in London, but most of the business should be under our control. That is the consequence of the UK’s decision to stay outside the euro area.”
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Mr Noyer’s broadside was one of several overt public attacks carried out by French leaders against Britain at the time.
Just before Standard and Poor’s removed France’s AAA rating earlier this year, Mr Noyer said the UK should have been downgraded before France’s because the UK has “so much debt, more inflation, less growth than us”.
Jean-Pierre Jouyet, the former head of the French financial regulator, described the right wing of British politics as “the stupidest in the world”.
The EU chief negotiator for Brexit, Michel Barnier, also tried actively at the time to undermine London’s strength as Europe’s financial center.
In 2010 the former French minister was appointed EU commissioner for the internal market and services and tasked with restructuring the European financial services sector.
In the UK, Mr Barnier was immediately criticized.
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The main allegation seemed to be that he was more on the side of then-President Nicolas Sarkozy than on the side of London’s financial sector leaders, who were under pressure.
As the Daily Telegraph put it, “the French were seen as a threat”.
Great Britain’s fears also seem to have been justified.
EU correspondent for the Financial Times, Alex Barker, noted in a 2011 report how the myriad of Brussels proposals had shaken the UK financial world and ministers saw that such measures were detrimental to the sector or curtailed UK regulatory powers.
That nervousness reportedly erupted when David Cameron groaned about the city being “under constant attack”.
For the former Prime Minister – and a representative of the UK financial industry – the problem was not an isolated issue, but rather a worrying trend.
Anthony Belchambers, executive director of the London-based Futures and Options Association, told the publication at the time: “The office economy, ill-informed tax initiatives, protectionist policies and high ‘pass-on’ costs will damage the city’s international reach.”
Mr. Barker also pointed out that the underlying alarm in London was a deeper fear; that Mr Barnier and his supporters have used the regulatory system to undermine London’s strength as Europe’s financial center.
The EU correspondent wrote: “Rivals like Paris and Frankfurt are already on the rise.
“UK Treasury officials are suddenly taking calls from companies offering tax breaks to move to the French capital.
“Regulators are weighing whether to allow NYSE Euronext to merge with Deutsche Börse to give the world’s largest exchange a Dutch postal address and considerable reach across Europe.
“France and Germany ‘see the city as ripe for looting,’ in the words of a European official.”
“‘The British are just waking up to it,’ added the official.
“‘And in some cases they are too late.’
“In addition, analysts warn that the pursuit of tighter economic governance in the euro area could bring the UK to the brink of reorientation of the EU, with lasting consequences for the city.”
Mr Barnier always dismissed complaints against him as “nonsense”.