Bespoke adj – “made for a specific purpose or user”.
This is the word repeatedly used by Theresa May to encapsulate what she hopes to achieve from a final trade deal with the EU following Brexit.
In this instance, it means neither the Norwegian model of high single market access but low control, nor the Canadian model of a more separate arrangement that the EU insists the UK will have to choose between. However, specific details of what it does mean have been very limited thus far. If pushed to pick one of the existing options, the UK government appears to favour the latter, but only in a ‘Canada plus plus plus’ format with additional perks attached.
Increasingly, it appears that the importance of the financial services sector to the UK’s economy could be pivotal in the deciding which route the deal follows but, again, the UK government has kept its cards close to its chest in what it hopes to achieve in this regard.
As Brexit negotiations have progressed, the UK has consistently stressed the importance of financial services, based in London, continuing to hold ‘passporting rights’, thus allowing them to freely access customers and markets in the EU and EEA, after Brexit. However, this implies retaining some link to the single market, similar to the UK government’s apparently least-preferred outcome – the Norway model – and which would cross one of Mrs May’s Brexit ‘red lines’. The Norway model has already been labelled as ‘democratically unsustainable’ by the UK government.
In response, the EU has not been prepared to countenance a preferential ‘have cake and eat it’ deal and has said the inclusion of terms addressing financial services must be matched with a quid pro quo. This stance is designed to maintain the integrity of the single market.
At the end of his summit meeting with Mrs May in January, French president Emmanuel Macron indicated what that might entail, namely, continued UK contributions to the EU budget akin to those made by Norway.
Mr Macron’s intervention is consistent with comments made by Michel Barnier earlier in January when he insisted that ‘…there will not be any cherry picking’ or blending of pre-existing deal models.
Mr Barnier added that full discussions about the future relationship between the UK and EU will only begin following Brexit, rather than in the run-up to the withdrawal agreement that is due to be completed in October 2018.
In response, David Davis has used the same mantra in relation to the EU 27 and has insisted that financial services must be included in any final deal, particularly with regard to supporting financial supervision and preventing banking ‘fragmentation’. He also emphasised that this would be of mutual interest to the UK and EU.
The ensuing stand-off has been a familiar theme in Brexit negotiations thus far and there will be intense discussions ahead in the hope of arriving at an agreed position. Some observers have claimed that a trade deal involving financial services could take years to conclude. However, the City wants certainty as soon as possible and it will be fascinating to see how this particular Brexit battle plays out.
Article published: 31st January 2018
