Even though we legally left the EU in January last year, it’s only this month that the transition period ended, and we are properly at the beginning of a new era. We’re in it for the long term too.
Keir Starmer has made clear that if he becomes Prime Minister Labour won’t be looking to take us back into the EU, or to renegotiate the current deal to seek, for example, to reinstate freedom of movement.
So, how’s it looking so far? Well, the sky hasn’t fallen in for most people, but there are clearly significant impacts being felt in certain areas. The agreement struck was the first time the EU has agreed a zero tariff zero quota deal with any other trading partner – a big relief to business in that it avoided otherwise major impacts for significant sectors.
But while ports haven’t yet seized up, non-tariff barriers are biting hard in places and firms are struggling to meet the new requirements. Contrary to what Boris Johnson promised, there is also very much a border being felt down the Irish Sea. There are also signs that some smaller suppliers are deciding that exporting their produce to the province isn’t worth the hassle.
Even large chains have been struggling to maintain stocks and road hauliers are warning the supply chain is in danger of collapse. Michael Gove has acknowledged things are likely to get worse before they get better – a sure sign there are serious issues that need to be addressed. Scottish fishermen – one of the key groups Brexit was meant to benefit – are saying they can’t get their catches to market. All this when we are in a grace period and before EU customs controls are tightened.
The deal is having some other minor and less widely expected impacts. Expats living in the EU who order products from UK that are made in the Far East, for example, are finding they have unexpected customs duties to pay.
For Financial Services of course the deal had very little to say. As expected, it was a no-deal Brexit with limited rollover extensions in certain areas to avoid financial and economic instability. We’re now in a holding pattern while the EU decides whether and to what extent it will grant equivalence to the UK.
Meanwhile some funds and trading income have necessarily switched to EU member states, although job transfers remain far from originally predicted. A Memorandum of Understanding covering regulatory cooperation is being worked on with a target of end the of March for agreement.
The Governor of the Bank of England is clear that any EU demands that would require UK to be a rule-taker should be rejected, even if it scuppers any chance of securing equivalence from the EU.
With the trade agreement now in place, the UK having unilaterally implemented equivalence for EU states and key areas like clearing covered by extensions there’s little incentive for the EU to rush to equivalence decisions – particularly with the UK starting to diverge on issues like solvency.
Rather it is likely to take its time, push the UK for about how far and fast we intend to diverge and see how much more business it can get from London.
So, things are likely to drag on. The impact of Brexit on the City will play out the over years, rather than months, to come.
Rishi Sunak predicts a Big Bang 2.0 for the Square Mile and is committed to keeping London the most dynamic financial centre in the world. Industry players should be pushing his open door with creative ideas on how to deliver on that commitment.