The FT piece is: Brussels squares up to UK in fight over euro swaps clearing - EU is increasingly worried about London’s dominance over the €81tn industry
Swaps are used by companies to guard against changes in interest rates. Brexit has already caused some loss of this business with the trading of some euro swaps moving to Paris and Amsterdam as well as to Wall Street. But London still has 90%. A senior unnamed executive at an investment bank based in London said:
“The EU wants to do this [move euro swaps into the EU] for commercial reasons, but is trying to find a way to do it through non-commercial reasons,”
Now we’re worried about the Europeans competing with us! I don’t know if the EU will succeed or not but in trade, the larger entity usually gets its way. We'll see.
Now, the most amazing article appeared in The Daily Telegraph by their City editor Ben Wright: The City is starting to give up on the EU, There’s much less to a new financial deal between the UK and Brussels than meets the eye
He says (remember this is The Telegraph):
"Whatever your view of Brexit, there can be little debate that the best trade agreement for the City of London was the one that it had before the UK voted to leave the European Union: full access to the single market and an outsized say in the shaping of its financial regulations. As of now, there are certain services that UK-based firms are simply not allowed to provide European clients."
I never thought I would read this sort of stuff in that particular newspaper. He is highly critical of the TCA. Take a deep breath and read this:
"The new 'deal' is therefore a bit like suspending all the Eurostar, Eurotunnel and ferry services between the UK and the continent and then laying on a few replacement pedalos. Actually, that’s not quite right. It’s more like agreeing a quorum to timetable future discussions on the feasibility of introducing pedalos at an as yet unspecified date."
He argues that 'equivalence' isn't really worth it and Britain shouldn't even bother with trying to get the EU to agree it. Wright says The City should look at Asia for more business. He does note that the US uses equivalence to carry out euro derivatives trading in New so I assume without such a deal, keeping the euro swaps trading in London, as mentioned in the FT, will be impossible anyway. The City is on the horns of a dilemma.
Finally, the BBC’s Simon Jack reports on two businesses he spoke to in January about ‘teething problems’ caused by Brexit. Both were SMEs who exported significant amounts to Europe. His article: UK exporters consider 'worst case scenario' plans, reveals that the teething problems only masked the real issues.
Rex London, a specialist gift company selling goods all over Europe is now setting up an operation in Belgium and Forage Plus, a supplier of nutritional products for horses based in North Wales, has more or less stopped exporting to the EU. The owner is trying to find a way to continue with the £300,000 European business but can't afford a warehouse in the Netherlands.
What we are seeing is the disastrous impact of Brexit playing out exactly as the experts said it would. As Tony Blair might have said, the kaleidoscope has been shaken up and the pieces are still in motion but no part of this looks like a success story in the making or even anything close to it. It is all damage limitation.
And on that note, there has been a lot of speculation on Twitter concerning the whereabouts of Michael Gove, essentially the man responsible for the deal and the planning for it. Somebody unkindly suggested he might be in The Ivy - a rehabilitation clinic. He certainly hasn't been seen for a while. I wonder where he is?
Finally, finally. Tom Kibasi in The Guardian has a nice piece essentially on the same topic as my post yesterday (but far better) : Biden's tariffs threat shows how far Brexit Britain is from controlling its own destiny.
