May’s bad Brexit works for Jersey - Editor's Blog -

Political agendas have taken control of the Brexit negotiations. This makes a no-deal scenario more likely even though there are plenty of solutions to hand, writes Brian Caplen.

The UK prime minister’s 'Chequers plan' for Brexit has very few friends. Theresa May has managed to alienate both remainers and leavers in her own party as well as the opposition and her EU partners. If this is where compromise gets you, perhaps getting off the fence and taking a stand might lead to a better result.  

The Chequers plan with its dual-tariff customs arrangement is overly complicated yet it is wrong to state, as EU officials have, that such a deal sets a dangerous precedent because it divides up the four freedoms of the European single market (in goods, services, people and capital).

The island of Jersey is not part of the UK (it is a British dependency) and is not a member of the EU but it is within the customs union for goods while being outside for services. Switzerland is in a similar position.

As a third country Jersey’s finance industry gets EU access by establishing that its regulations are equivalent and it carries out this task completely independently of the UK. Indeed, Jersey was one of the first jurisdictions to be recommended for passporting rights to market alternative investment funds into the EU under the Alternative Investment Funds Managers Directive. “Equivalence has worked well for us. In future we may be negotiating alongside the UK for third country access under EU financial services legislation,” says Geoff Cook, CEO of Jersey Finance. 

Furthermore, the argument, used by the EU, that goods cannot be split out from services, as they frequently come as package, also does not stand up. In fact, a European single market in services barely exists.

Charles Grant, director for the Centre of European Reform, says: “…this argument is weak; most of the services that feed into the production of goods, such as marketing, design, engineering, law and accountancy are not regulated by the EU so there are no EU standards to undercut.”

Politics not principles are currently preventing a UK-EU Brexit deal. Even on the most contentious issue of all – the free movement of people – there are solutions to hand. Jersey, Switzerland, Denmark and Austria reserve parts of the housing stock for nationals, for example. In fact, the UK could have controlled free movement much more effectively while still a member by having a registration system as most EU countries do, by restricting access to welfare, returning migrants without jobs and enforcing the terms of the posted workers directive. These measures would have been sufficient to push the referendum vote the other way.

Sadly, politics is triumphing over common sense in the Brexit negotiations with both sides equally to blame.  

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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