Brexit: What the hell happens now – Errors and clarifications part three

Right, this is a major error. It’s basically about the role of financial services regulation in the EEA. Yeah, I know. Still your beating heart. Don’t let the excitement overcome you. But still, this is serious stuff. If we pursued soft Brexit, the absence of those rules in the EEA would stop our firms from enjoying passporting, which is one of the major reasons we might chose to pursue soft Brexit in the first place.

It’s by far the biggest I made in the book, taking up nearly a page of material. When I started realising that I’d made a mistake here, I wondered why no-one had pointed it out to me. After all, there have been plenty of ridiculously clever and well informed people emailing me about smaller matters in the book. And then I tried to work out what I’d got wrong and… no-one knew. Eventually I ended up on the phone with someone who had literally helped write the EEA agreement and even he was struggling. Reliable information about Efta is hard to get of. It’s a highly technical, out-of-the-way trading arrangement which is suddenly having a lot of attention thrown on it. There’s a real absence of experts who can authoritatively comment on it.

On page 69 I state that the EEA agreement doesn’t incorporate the three European supervisory agencies on banking, insurance and security markets. This is true, but dumb. It doesn’t incorporate any EU supervisory agency, because it makes its own. This was really sloppily written.

But more important is the central thrust of the argument – whether EU financial regulations have been filtered down to Efta. If they have, we could continue passporting in a soft Brexit. If not, we can’t. I thought they hadn’t. In reality,  EU financial services regulation put in place after the financial crash are currently being filtered through, so some haven’t and some have.

Efta is currently taking sections and figuring out how they would work for Norway, Iceland and Liechtenstein.

There’s quite a bit of political momentum to this now and it is likely to be complete by March 2019, which is the earliest Britain would be joining Efta if it decided to pursue soft Brexit, or a transition in the single market. But financial regulations are sensitive areas so there could be a snag. Either way – the plans are not currently in place, but they are set to be in place by the time we arrived, if we ever chose to do so.

I can’t even tell you how many calls I have had to make to find out about this. It is really hard to get firm information about financial services in Efta. Also, it has been deeply tedious. I am considering this a form of moral punishment for my error.

But the key take-away message is this: Britain’s financial services firms would probably be able to still use passporting if it stayed in the single market through the EEA, but there is a chance they could not. This, like so much else in the Brexit debate, would be outside of our control.

I’ll have a long piece on the practicalities of EEA membership up on later this week which should be able to go into this stuff in more detail.