Brexit and the battle for financial services

ABSTRACT

This paper analyses the policy developments concerning the Single Market in finance in the context of Brexit. Theoretically, we engage with two bodies of work that make contrasting predictions on European financial market integration and the development of European Union (EU) policies on financial regulation: one focused upon a neo-mercantilist ‘battle’ amongst member states and the other stressing the importance of transnational financial networks (or coalitions). Empirically, we find limited evidence of the formation of cross-national alliances in favour of the United Kingdom (UK) retaining broad access to the EU Single Market in financial services, the presence of which would have aligned with the expectations of analyses focused upon transnational networks. By contrast, the main financial centres in the EU27 and their national authorities competed to lure financial business away from the UK – what we explain in terms of a ‘battle’ amongst member states and their national financial centres.

KEYWORDS:

• Brexit
• financial services
• financial regulation
• European Single Market
• France
• Germany

Acknowledgements

The authors would like to thank Sébastien Commain – currently a doctoral student at the University of Luxembourg and research assistant to Professor Howarth – for his help conducting a number of interviews with financial company and association representatives in Brussels and Paris. This paper was partly written while Lucia Quaglia was a research fellow at the Scuola Normale Superiore, Florence.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

David Howarth ([email protected]) is Professor of Political Economy at the University of Luxembourg and a former Jean Monnet Chair at the University of Edinburgh.

Lucia Quaglia ([email protected]) is Professor of Political Science at the University of Bologna.

Notes

1 We wish to thank an anonymous reviewer for this point.

2 Equivalence rules stipulate that unless third country rules are equivalent to EU rules, foreign firms providing services in the EU or doing business with EU counterparts would be subject to EU regulation in addition to their home country regulation. Without equivalence, foreign firms failing to respect EU regulations would be blocked from accessing the Single Market.

3 According to Frankfurt Main Finance – the main financial sector promotion body of the City of Frankfurt – quoted in the Handlesblatt, 26 April 2017.

4 We wish to thank an anonymous reviewer for this point.