The key in financial services is passporting. Even post referendum there were hopes this could be agreed but it’s not in the FTA and may not be agreed at all. So progressively the large firms have been shifting assets and people to Frankfurt, Paris or Dublin. Estimates vary but about 5,000 to 10,000 jobs have gone and about $1.5 trillion in assets with them. More may follow. London remains pre-eminent in the European time zone but much if not all euro-clearing business will shift to a euroland country. More jobs, more assets, none to return. And other service companies such as lawyers, accountants, tax advisers will have to service their EU clients from within the EU. I think London will retain its position in the time zone for some years yet but there will be a continual gradual erosion of its position in the years to come. The Office of Budget Responsibility estimates that Britain has already lost 2% of potential output since the 2016 vote with a further 3.2% to come, blaming rising trade friction, restrictions on immigration and red tape. And even with a trade deal we could lose 5.2% of potential GDP over 15 years.The trade deal, the terms of which are still fairly unclear, will be the first which actually result in a worse trading position than before because we are leaving the customs union and the single market. So while it is welcome that a deal is reached because no deal would have been much worse, we are going to have to do a huge amount more business with the rest of the world before we make up the loss. And that trade will have to be with countries we have already been able to trade with freely as a member of the EU so I don’t quite see where the net gain will come from.
Jonathan Callaway ● 1951d