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Tuesday 11 February 2020

Is this the beginning of the end of the Boris bonanza? The prime minister will today announce it’s full steam ahead for HS2. Meanwhile it has been revealed the government, will make a bold pitch for access to the EU’s financial services market. But Brussels will want control, which it would abuse to bully Britain over the coming decades.

The omens are not good. Sticking with HS2 was the easy option, will that be Boris’s legacy? The prime minister who always chose the path of least resistance. We sincerely hope not.

Javid’s financial services gambit in danger of backfiring badly

The government will push the for “binding processes in the free trade agreement” towards permanent access to the EU’s financial markets, a snapshot of a document held by the chancellor reveals.

The image, taken with a long photo lens, shows Sajid Javid wants British negotiators to take a tough stance with the EU, any deal must include services locked in over a long timeline, Brussels will then be unable to hold our gigantic financial services sector hostage, a tactic it has used in the past. 

At the beginning of January, sources in Brussels claimed any deal on financial services, which the UK has a significant trade surplus in, would have to come in exchange for full access to Britain’s fishing waters. Boris has said our depleted seas will become sovereign again, reducing the likelihood of a deal at all.

France’s Emmanuel Macron has since demanded Britain carries on swallowing EU regulations otherwise it’s no deal.

The prospect of a deal on services therefore looks dim unless Javid quickly rows back on his initial pitch, which his papped document also reveals he is prepared to do.

The paper envisages two different “landing zones” on equivalence, the loose EU mechanism that allows cross border sales of financial products like derivatives. The two compromises amount to the same outcome: Brussels acting as permanent gatekeeper to its financial markets, which it will use to threaten the UK on other matters, fisheries being just one.  

The City of London is a powerful political actor and Javid’s posture is viewed as a direct response to widespread discontent with Boris’s bullish stance with Brussels since the election.

And we’ve been warned. As recently as last year the EU strong-armed Switzerland by pulling the alpine nation’s equivalence rights leading to a stock market tumble.

This could be a tactic the EU uses again and again with us. 

Equivalence is based on non-EU countries sticking to EU rules, which is why the chancellor says he is “committed to the highest international standards of financial regulation” in an article for City A.M. today. And more worryingly, “we may choose to do things in the same way as the EU if it works for the UK.”

Stick to Boris’s script we say. There’s plenty of business out there in the wider world, even for a hungry sector like UK financial services and if we are going to “level up” as the PM has promised, the government needs to stop acting at the beck and call of big finance and listen to the rest of the country.