Brexit outrage after France called for City of London to be stripped of status
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Earlier this month, the Governor of the Bank of England, Andrew Bailey, said the City of London should not expect the EU to open the doors to UK financial services exports after Brexit. He told a news conference: “On equivalence, I think it’s fair to say that nothing really has moved forwards.” After months of fraught negotiations, new rules for trade were finally agreed at the end of December.
However in a document spanning over 1,200 pages, there was very little mention of financial services: a sector which accounts for seven percent of the UK’s economy and 10 percent of its tax receipts.
Without this recognition, London firms will be blocked from gaining access to the market.
The EU’s intransigence is not a major surprise as ever since the UK decided to leave the bloc, major European capitals such as Paris or Frankfurt have tried to take the City’s place as Europe’s financial centre.
The French sent constant delegations to London to tour boardrooms, while Frankfurt was setting up special schools for all the banking families making the move.
Even before Brexit, France has been trying to sideline London.
In 2012, the former Governor of the Bank of France, Christian Noyer, said London should have been stripped of its status as Europe’s main financial hub and sidelined to allow the eurozone to “control” transactions within the bloc.
Mr Noyer told the Financial Times that there was “no rationale” for allowing the eurozone’s financial centre to be “offshore”.
He said: “Most of the euro business should be done inside the euro area. It’s linked to the capacity of the central bank to provide liquidity and ensure oversight of its own currency.
“We’re not against some business being done in London, but the bulk of the business should be under our control. That’s the consequence of the choice by the UK to remain outside the euro area.”
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Mr Noyer’s broadside was one of several outspoken public attacks that had been launched by French leaders on Britain at the time.
Shortly before Standard and Poor’s stripped France of its AAA credit rating earlier that year, Mr Noyer said that Britain’s rating should have been cut before that of France as the UK had “as 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 world’s stupidest”.
The EU’s chief Brexit negotiator, Michel Barnier, was also actively trying to sap London’s strength as Europe’s financial centre at the time.
In 2010, the former French minister was appointed European Commissioner for Internal Market and Services and was asked to clean up Europe’s financial services sector.
In Britain, Mr Barnier immediately faced criticism.
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The main accusation appeared to be that he was more likely to side with then President Nicolas Sarkozy than he was with the leaders of London’s under-pressure finance sector.
As the Daily Telegraph put it, “the Frenchman was seen as a threat”.
The UK’s fears appear to have been justified, too.
Financial Times EU correspondent Alex Barker noted in a 2011 report how the myriad of Brussels proposals had left Britain’s financial world reeling and ministers saw such measures hurting the sector or crimping UK regulatory powers.
That nervousness reportedly burst into the open, with David Cameron moaning about the City being “constantly under attack”.
For the former Prime Minister – and figures from the UK’s financial industry – the problem was not one single issue but rather a worrying trend.
Anthony Belchambers, chief executive of the London-based Futures and Options Association told the publication at the time: “Red tape, ill-informed tax initiatives, protectionist policies and high ‘pass on’ costs will damage the international reach of the City.”
Mr Barker also pointed out that the underlying alarm in London was a more visceral fear; that Mr Barnier and his backers had been using the regulatory system to sap London’s strength as Europe’s financial centre.
The EU correspondent wrote: “Already, rivals such as Paris and Frankfurt are on the march.
“UK Treasury officials are suddenly fielding calls from companies offering tax breaks to move to the French capital.
“Regulators are weighing whether to permit NYSE Euronext to merge with Deutsche Börse, giving the world’s largest exchange a Dutch postal address and a formidable reach across Europe.
“France and Germany ‘see the City as ripe for plundering’, in the words of one European official.’
“‘The British are only just waking up to it,’ the official adds.
“‘And in some cases they’re too late.’
“Furthermore, analysts warn, the drive for tighter eurozone economic governance could leave Britain on the sidelines of an EU realignment, with lasting consequences for the City.”
Mr Barnier always dismissed complaints against him as “nonsense”.
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