Barnier’s extraordinary attack on City of London: ‘Shouldn’t be European financial hub!’

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Brexit negotiations with the EU started up again in mid-January, with talks on financial services. After months of wrangling, new rules for trade were finally agreed on Christmas Eve but 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. According to Lee Rotherham, the former director of Special Projects at Vote Leave, there is a simple explanation why the deal did not include an arrangement for financial services.

He said: “Overall, the Services section seems like an average free trade agreement (FTA), enabling activity up to a point.

“It is worth remembering that of the so-called ‘Four Freedoms’, [Services] is the area that was least pursued by the EU.”

He noted: “The UK wanted it; the Germans and French wanted to focus on goods, which was to their economic advantage.”

It is no secret that the bloc’s main hubs, such as Frankfurt and Paris, have been trying to use Brexit to spell the end of London’s status as one of the world’s leading financial hubs.

In June 2020, the EU’s former chief Brexit negotiator, Michel Barnier, even called for London to lose its status as a European centre for financial and legal services after Brexit.

Mr Barnier said Britain should have not been allowed to become a stepping stone into the EU market or a manufacturing hub for the bloc after the end of the transition period.

He told representatives of the European Economic and Social Committee that Britain should have also not kept its large share of the lucrative market for testing goods.

The French politician said in Brussels: “During its 47 years of membership, the UK built up a strong position in the EU market in a number of strategic areas, financial, services, businesses, and legal services, and also regulation and certification.

“This was made possible by the fact that the UK was an EU member state within the single market.

“As it prepares to leave the single market and leave the customs union, we must ask ourselves whether it is really in the EU interest for the UK to retain such a prominent position.”

Mr Barnier warned against allowing the UK to assemble materials and goods sourced from all over the world before exporting them to the EU tariff and quota-free as a British good once a trade deal was signed.

This “would allow the UK to become a manufacturing hub for the EU”, Mr Barnier said, adding: “Do we really want the UK to remain a centre for commercial litigation for the EU when we could attract these services here?

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“Do we really want to consolidate the UK position as a certification hub for the EU, knowing that it already controls some 15 to 20 percent of the EU certification market?

“The truth is that, in many areas, it is demanding a lot more than Canada, Japan, or any of our other FTA partners.

“We cannot accept the UK’s attempt to cherry pick parts of our single market.”

It is no surprise the speech came from Mr Barnier.

In 2010, the French politician 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.

According to a 2010 report by the Daily Telegraph, the main accusation appeared to be that the former French minister was more likely to side with then-President Nicolas Sarkozy than he was with the leaders of London’s under-pressure finance sector.

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As the publication put it, “the Frenchman was seen as a threat”.

The UK’s fears appear to have been justified, too.

In a 2011 Financial Times report, EU correspondent Alex Barker noted 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 then-Prime Minister 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 Barnier always dismissed complaints against him as “nonsense”.

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