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What was that Brexit deal, again?

Britain has left the EU, but now I read headlines everywhere saying cross-border movements are impossible, Ireland is broken, the City was ignored, our fisherman cannot sell shellfish and so on and so forth.

A disaster?

Possibly but, on the other hand, everything that is wrong with the EU was illustrated by the Covid vaccine. Whilst 15 million people were vaccinated in the UK in 10 weeks, the EU was left out in the cold. Why? Because their contracting team ended up taking half a year to agree terms with the pharma firms. It is so much easier when you are just able to make a deal … the question is: what deal?

What deal did the EU want to do with the pharma firms? Apparently the same deal agreed by four EU nations (France, Germany, Italy and the Netherlands) in June 2020. It just meant the deal was delayed five months whilst the Eurocrats checked it out.

What deal did the UK do with the EU? The deal that met the need for Boris Johnson to get a Brexit deal. The problem with that is that the UK fishermen could have been thrown under the truck – and some have been – in exchange for an equivalence deal with The City of London. Instead, they did neither and threw both under the truck if the conversations I’m seeing in the media are to be believed.

Admittedly this could all be post-Brexit anti-Brexiteers propaganda, but then there’s this:

UK firms plan to shift across Channel after Brexit chaos

Hundreds of UK companies could switch operations to countries inside the EU in what is threatening to become a dramatic exodus of investment and jobs caused by Brexit. The Observer can reveal that by 1 January this year some 500 businesses – mostly UK-owned, or UK-based with overseas owners – were already making inquiries about setting up branches, depots or warehouses in the Netherlands alone, for “Brexit-related reasons”. Since then the number of inquiries from UK companies has increased further. If companies switch all or parts of their operations to Europe it will mean the loss of jobs, economic activity and tax revenue at home.

And, at the end of last week, this:

Amsterdam punctures City’s post-Brexit hopes, Financial Times, 11 February 2021

Less than six weeks after Britain’s actual departure on New Year’s Eve, Amsterdam has emerged as an early winner. Having already picked up activity in swaps and sovereign debt markets, the Dutch city stole London’s crown as Europe’s largest share trading centre last month.

… and this …

Brexit crowns Amsterdam Europe’s top trading hub, ousting The City , City AM, 11 February 2021

Amsterdam surpassed London as Europe’s largest share trading centre last month, as Brexit led London to lose business. Some €9.2bn shares a day were traded on Euronext Amsterdam and the Dutch arms of CBOE and Turquoise, the London Stock Exchange’s platform, last month – a more than fourfold increase from December, the Financial Times reported.

… and this …

City of London’s Brexit Tab Rises With Stock and Swaps Moves, Bloomberg, 12 February 2021

“Brexit is a body blow to the London financial center,” Xavier Rolet, former head of London Stock Exchange Group Plc, said in an interview. “I’m very deeply worried that Brexit is going to kill the golden goose and we are already seeing the first signs that this has started to happen.”

Oh dearie me.

But maybe they missed this?

Is the City losing to the Dutch? The Evening Standard, 12 February 2021

The FT reported on Thursday that €9.2 billion of shares a day are now traded on the Amsterdam stock market(s), a fourfold increase since December. London volumes fell sharply to €8.6 billion. This is because since Brexit, Brussels has not recognised London as having equivalent regulatory status. Until it does, the business of trading euro denominated shares has to go somewhere other than the City.

In other words, after the headline grabbing Brexit shock to the City, nothing much has changed until we get equivalence.

A guy in London (they are mostly guys, don’t write in) is still pushing a button in London, that leads to a trade going via Amsterdam, which comes back to London. This is in EU shares typically traded by foreign banks. The equities market is not that big compared to others: interest rate derivatives, foreign exchange, M&A deals, that’s where it is at. London is where the money is, where the fund managers that allocate capital want to be based … all that is really happening is that the order flow is being routed to Amsterdam, the teams are still mostly in London.

So the first point is that yes, there are issues about Brexit … but there are upsides and downsides. The UK got vaccines for COVID first and still has one of the foremost financial centres in the world. Of course there are going to be teething troubles with form-filling and parts of the market that had not been understood well – like the Irish border and possibilities of reviving separatism – but, as each issue arises, they get dealt with.

Having said all that, the one thing we don’t need right now is a Brexit party for the Brexiteers. If you haven’t heard of this, it is the Festival UK planned for 2022. Nicknamed FUK, it was allocated £120 million by the government to celebrate all things British and the benefits of leaving Europe. The views are expressed neatly in this offensive language by Ian Dunt (no pun intended), editor-at-large of http://Politics.co.uk

I would apologise for sharing that, but won’t.

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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