The Government's statement following the Cabinet's Chequers meeting is light on detail, particularly in relation to trade in services - including financial services. However, on a close reading a couple of key themes emerge.
First, the Government seems to be seeking to draw a clear distinction between regulatory frameworks for trade in goods, which it proposes will remain largely in place (in part to facilitate seamless borders). The statement notes that the Government will publish a White Paper detailing "a free trade area for goods". In contrast, in the context of services, the statement recognises that "the UK and the EU will not have current levels of access to each other's markets". For financial services, the statement specifically recognises that the proposed deal will "not replicate the EU's passporting regimes".
Second, the Government appears to view the "flexibility" of less close alignment in respect of services as a potential economic advantage, rather than viewing the loss of passporting as an economic disadvantage. As the detail of the Government's proposal emerges, it will be interesting to see the basis for this view and, in particular, any suggestions as to the areas in which the Government may seek to use this potential flexibility to the advantage of the financial services sector. Some regulated firms may be skeptical as to whether the benefits of regulatory flexibility will outweigh the potential costs of the loss of the existing passporting regime - not to mention how willing the UK regulators will be to adopt a more flexible position.
Services, which cover 80 per cent of Britain’s economy, are largely skirted over. The cabinet agreed to retain “regulatory flexibility” and accept less EU market access as a result.
The UK stance arouses suspicion in Brussels, with negotiators arguing it is hard to detach services from goods trade. They note that in areas such as financial services Britain still seems to want to replicate single market-style access from outside.