City of London abandons hope of staying in the single market

Senior figures will propose a beefed up version of Swiss deal


The City of London has concluded that it is politically impossible for the UK to remain in the single market, the FT reports today, raising major concerns about the future of the finance sector.

Theresa May has asked financial sector representatives to be prepared to deliver recommendations in early September, when she will convene the cabinet committee for Brexit.

Senior City figures believe it would be politically and practically impossible for the UK to adopt a Norway-style model, since Norway accepts freedom of movement and contributes large amounts to the EU, but has no say in EU regulations.

Instead, they will propose that the UK adopt a Swiss-type model, where certain sectors retain full access to the single market in exchange for maintaining equivalent regulations to the EU.

In Switzerland these benefits do not extend to banking, but representatives of the City will argue that the UK should enjoy an enhanced version of the Swiss agreement because the UK is currenly the the EU’s biggest export market.

Throughout the EU referendum campaign, the Leave campaign maintained that given its economic power and importance as a destination for EU exports, that the UK would be able to negotiate a trade deal that would preserve the benefits of membership without the (perceived) costs.

However, as experts predicted, other members of the bloc have made clear that there are no circumstances under which Britain can retain access to the single market without allowing free movement of labour.

Both Switzerland and Norway are essentially members of the Schengen area, and their levels of immigration from the EU are higher than the UK’s.

Additionally, any deal made with the EU is subject to the veto of any one of the 27 member states.

Membership of the European Free Trade Association — currently comprising Norway, Switzerland, Liechtenstein and Iceland— is also subject to veto.

Since June, Norway has repeatedly expressed concern that, given the size of the British economy, UK membership would shift the balance of power in a way the other members might not accept.

The Liberal Democrats have responded angrily to the news that the possibility of single market access is dwindling.

‘A bilateral deal is simply not good enough if we are to protect key parts of our economy, including our financial services,’ commented economics spokesperson Susan Kramer. ‘This jeopardises our ability to retain institutions that underpin the City’s success – including the clearing houses.’

‘It is naive in the extreme to think that France and Germany will not try to tempt our high value City businesses to set up shop elsewhere. The loss of tax revenue alone would make Boris’ mythical £350 million for the NHS look like pocket money. We need full membership to the single market.’

Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.