Brexit Britain should look to create a partnership with Switzerland
A tie-up with Switzerland makes sense for post-Brexit Britain, and would create a vitally important global financial centre, says Matthew Lynn.
We need a trade deal with the US. We need finally to make peace with Michel Barnier, and come to an agreement with the EU. We need to secure access to markets around the world so that we can still export globally. As the deadline for ending our transitional deal with the EU draws closer and closer, there are lots of different deals that Britain needs to negotiate in a hurry. But one is perhaps easier than any of the others and potentially more valuable: a UK partnership with Switzerland to create a global powerhouse in financial services.
A powerful force in banking
With just 8.5 million people, Switzerland is far from the largest country in the world, but its incredible prosperity makes it more important than you might imagine (it ranks 99th in the world in terms of population, but 20th by total GDP). More significantly, just like the UK, it is a powerful force in banking and money management. As a recent report from TheCityUK highlighted, Britain and Switzerland between them dominate global exports of financial services. UK financial exports are $82bn and Swiss exports are $23bn. Combined, that dwarfs the US at $68bn, Germany at $16bn and France at just $1.5bn. The US, of course, has a massive finance industry, but it mostly services its domestic market, while the rest of Europe hardly competes at all. But London, Edinburgh, Zurich and Geneva are all outward-looking, global financial hubs, focused on working with companies and investors around the world.
Here is the important point. Both Switzerland and the UK are now outside the EU. And both countries either have been, or will be, excluded from its single market in financial services. It remains to be seen what kind of deal can be agreed with the UK, but the EU has made it very clear it doesn’t want the City to keep the passporting rights that allow its firms to sell right across Europe, so it looks as if we will be excluded. Likewise, last year the EU locked Switzerland out of the single market in financial services in a failed attempt to whip the Swiss into line with its own rules. As it turned out, it didn’t make a great deal of difference. Instead of trading Nestlé’s shares in Frankfurt, you had to trade them in Zurich instead, but the Swiss bourse continued to outperform most of the rest of Europe as it usually does.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Huge rewards for both countries
There is a natural deal to be done. The UK already has a series of bilateral agreements in place that will preserve access to each other’s markets after our transitional deal with the EU comes to an end. But we should go a lot further than that. The two countries are natural allies and partners. A UK-Swiss tie-up has the potential to create the world’s most important financial hub.
Between them, the UK and Switzerland could create their own single market in finance. It would set its own rules and standards by agreement between the central banks and regulators in both countries. British firms should be allowed to operate completely freely in Switzerland, and vice-versa. Both markets should be thrown completely open to investors and companies from around the world. The legal systems, reputation and stability of both countries means those standards would immediately be accepted globally.
It is a big prize, with huge rewards for both countries. A UK-Swiss partnership wouldn’t necessarily be the biggest financial centre in the world. Wall Street would still be larger and Shanghai will in time move into first place as China’s economy becomes the biggest in the world. But it would be the biggest international centre and one few investors could ignore. It would be a magnet for just about every company in Europe that wanted to tap the global capital markets and the gateway for American and Chinese businesses that wanted to raise money from the rest of the world. And it would be 50 or 100 times more important than Frankfurt or Paris, which would put all the heated debate about securing a trade deal with the EU by the end of this year in perspective.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrency
According to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
By Chris Newlands Published
-
Investing for children this Christmas – five ideas
It might not come with a shiny ribbon, but an investment fund could be the gift that keeps on giving. We share five ideas if you are investing for children this Christmas.
By Katie Williams Published
-
UK wages grow at a record pace
The latest UK wages data will add pressure on the BoE to push interest rates even higher.
By Nicole García Mérida Published
-
Trapped in a time of zombie government
It’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
By Max King Published
-
America is in deep denial over debt
The downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
By Alex Rankine Published
-
UK economy avoids stagnation with surprise growth
Gross domestic product increased by 0.2% in the second quarter and by 0.5% in June
By Pedro Gonçalves Published
-
Bank of England raises interest rates to 5.25%
The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
By Ruth Emery Published
-
UK wage growth hits a record high
Stubborn inflation fuels wage growth, hitting a 20-year record high. But unemployment jumps
By Vaishali Varu Published
-
UK inflation remains at 8.7% ‒ what it means for your money
Inflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
By John Fitzsimons Published
-
VICE bankruptcy: how did it happen?
Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
By Jane Lewis Published