The temptation of slotting the future UK-EU relationship into a predefined category has proved too much. Norway’s model, the financial community’s top choice, seems to have been discarded, given its migration and EU-budget requirements are unpalatable to other constituents.
Attention has now turned to the Swiss set-up, with its web of sector-specific bilateral agreements. Yet emulating this also seems unachievable: Brussels is fed up with the need for continual updates, making it loath to replicate the cumbersome arrangement with the UK. And as there is no financial services agreement, there is no tangible benefit for the City of London.
The only way the UK should emulate Switzerland is its reliance on equivalence determinations. It is an imperfect and drawn-out process. But third-country passports under the Alternative Investment Fund Managers Directive and revised Markets in Financial Instruments Directive (MiFID II) alone would allow funds, banking services and investment products and services to be marketed across the single market.
Equivalence could actually be more workable for the UK than Switzerland. MiFID II does not give access to individuals – including high-net-worth ones – making it of limited use to Switzerland’s private banks. It is more conducive to corporate and investment banking, the backbone of London’s financial centre.
Yet equivalence is as much a feature of the Swiss model as it is the Australian, Hong Kong or Singaporean models. Many governments are pitching for third-country passports to secure single market access. Naturally, UK-EU exit talks will draw on other countries for inspiration, but the comparisons need to end.
The irony is that Switzerland is awaiting the outcome of Brexit talks, hoping to leverage off the British model in renegotiating its relationship with the EU. If both keep looking to the other for precedent, we may be at the beginning of a vicious cycle where no one is willing to forge a new path into the prized single market.
