Swiss-style deal will not work after Brexit, Hildebrand warns
The former head of the Swiss central bank has warned that the UK is wrong to think that negotiating a Swiss-style deal with the EU for financial services will be a feasible or desirable response to Brexit.
“We [Switzerland] have not been able in any way to regain any sovereignty on immigration. And we have no financial services agreement, despite the fact that we’ve negotiated for 10 years. Don’t believe that you’ll get anything else,” said Philipp Hildebrand, now vice-chairman of the world’s largest asset manager BlackRock.
Mr Hildebrand warned that leaving the EU would spell an end to London’s role as Europe’s financial services hub during a panel debating the future of the City at Saturday’s inaugural FT Weekend Live Festival at Kenwood House.
His comments will unsettle financiers across the City and Whitehall, who are seeking a bespoke deal allowing the UK’s different sectors to trade with Europe. Having all but given up hope of universal access to the EU single market — known in regulatory parlance as “passporting” — many have called for a deal modelled on the EU’s relationship with Switzerland.
However, concerns about immigration were a key contributor to Britain’s vote for Brexit and Theresa May, prime minister, has pledged to curb immigration. Switzerland, by contrast, has accepted the free movement of EU citizens across its borders and belongs to the Schengen passport-free travel area, a stance that has prompted a populist anti-immigration backlash.
Mr Hildebrand said: “If sovereignty on immigration is the anchor of the government’s strategy, and that’s what you want as the British people, then you have to accept that you will not get passporting, you will not get a financial services agreement. You can get, with skilful negotiation, pretty much open physical trade. But the financial side will be very difficult.”
During a decade-long period, Switzerland has negotiated close to 160 specific trade deals, though none relates specifically to finance, Mr Hildebrand pointed out.
Losing access to the single market would be a huge blow to the UK’s financial services industry because foreign institutions use Britain as a launch pad for their activities in Europe. If they are forced to move parts of their operations on to the continent to access the EU, that could, over the longer term, diminish London’s status.
Mr Hildebrand said: “That’s why I say if that’s the way the government is going to go, then it’s clear that London will not be the premier European financial centre that it has become.”
The City’s push to communicate its Brexit priorities to policymakers is led by a task force of grandees, chaired by Baroness Shriti Vadera, the chairman of Santander UK and a former Labour minister.
On Friday, City financiers warned that 20 per cent, or £9bn, of the City’s capital markets and investment banking business, could be at risk in the event of a Brexit deal that includes no or limited access to the single market.
More optimistic voices in the City have suggested that the UK could deregulate and position itself as a sort of offshore centre — a Singapore of Europe.
But Mr Hildebrand said the UK should be careful about watering down rules enacted after the financial crisis that require banks to have larger capital buffers.
“We should deregulate on all the cumbersome things but we should remain very very tough on the capital ratios. And it’s the capital ratios that are leading to very significant changes in the business models of the banks,” he said.