Actual economic effects...

[Spinflight]

FTSE closed on Wednesday at 6138. Closed on Friday at 6138.

Long term borrowing rates have come down as brexit appeared more likely, 10yr ones from 2% down to 1.09% post brexit. Similarly all the European long term borrowing rates rose sharply. Lesson? We are a less risky and more credit worthy outside the EU than in.

One ratings agency did drop our credit worthiness, though oddly the last time they did was out of fear of Eurozone contagion. Seems completely at odds with the long term borrowing rates, which matter quite a great deal given our debts.

The pound dropped, quite significantly. It appears however that there was some 'unusual' activity in the market which forced it down whenever the Leave campaign polled well. To the extent of trying to sell it when there were no buyers.

Some people lost a great deal of money, probably dwarfing the millions contributed to the remain campaign, lets hope it was Goldman Sachs and JP Morgan. :)

Oh whatever Want2b , thats a facile argument, WTO negotiations would take years because of how complex they are.

I'd explain , but you'd just dismiss the point again, because like all Brexiteers you want to stick your fingers in your ears or call project fear when any expert advice doesn't agree with your own perspective.

The Director General of the WTO btw is Brazilian.

larry "How about we keep the current deals until we have fully negotiated something new. I suspect that all would agree to that"

Do you mean the uk should keep trading off the same deals as the EU do until they negotiate new ones despite leaving? Or use the WTO rules? I can see a lot of people having a problem with that, mainly the EU. That's like someone leaving a trade union at work but trying to reap all the benefits with no fees.

Also in simple terms say say US charges EU 50p tax to buy a 1 pound orange and they could now try and charge the UK 75p why would the keep allowing the 50p rate when the know the UK needs the oranges? I think you are giving other countries too much benefit of the doubt in their kindness.

"Also we have the 5th largest economy in the world."

Um about that...

France overtakes Britain as world's No 5 economy after Pound drops.

Cote

Does anyone know exactly what London passporting is? It's casually referred to on the news and in the papers. I am left wondering, exactly what transactions are covered by it? And, what percentage of London's banking business do they make up?

supermum I didn't mean the French will move their banks to France, but picking up the clearing services we will lose.

Hollande's posturing doesn't signify anything beyond a determination to restrict UK financial services. France is too mired in regulation to be really attractive, and positively anti-banking in sentiment.

I've not heard of concrete plans for deregulation other than tax breaks for foreginers, tax breaks for financial services, and fast process of applications.

The point of us as far as US, China are concerned is that we are the springboard to the EU. Out of the EU we are f all use to them, as we're a small market comparatively. They will go straight to France and Germany now as that is where the power is, and that is where the investment will go.

I know the current WTO director general is Brazilian. Look at the past directors and tell me how they are socialists/ gone on or have previously worked for the EU.

As to being 5th or 6th after the devaluation, the UK is still one of the largest economies in the world that other markets will want to access.

Is this 'passporting' the same thing as 'equivalence' or something different?

Basically its the right to do deals, or to advise on them within the EU.

If you work out that our largest exports are financial services, and lots of them are based on our ability to trade within the EU or consult on it to countries from outside the EU. Its a big proportion.

www.bankofengland.co.uk/pra/Pages/authorisations/passporting/default.aspx

OK. I thought I understood this 'passporting' thing but then somebody mentioned 'equivalence' and to someone trying to understand a bit about lots of stuff, rather than a lot about a bit, it all seems quite confusing.

My next question will be about trade deals. x

I'm left wondering, how can the EU stop countries outside the EU from doing offshore deals in Euros? I know the US tries to control what happens around the world in dollars (think of the FIFA scandal), but has limited success because it can be impossible at a practical level to stop it.

(I don't want to be a big version of the Cayman Islands sitting in the North Sea off the coast of Europe by the way, just trying to understand the ultimate parameters of all this.)

I told you Supermum I think the "vested interest" argument in terms of the DG of the WTO is a poor way to dismiss expert advice.

Again, you only make it because you don't like what the experts are saying.

On your trade deal argument, yes the EU will want to continue exporting here,trade will not stop, but what you don't seem to understand is that the EU won't give this deal that has all the benefits of being in the EU without the bits that you Brexiteers don't want.

Also 3% of the EU 's GDP is based on UK trade, 16% of the UK's GDP is EU trade, we take 15% of their exports, they take 44% of ours, they hold the better hand in negotiations.

GrandadGrumps - this is the best explanation of passporting I've seen on MN:

"I'm in financial services and yes it's devastating for us and for my business in particular. What makes FS different is that we cannot just trade across borders by observing the relevant regulations as you could if you had a factory in the UK and were selling your product into France. As long as it's legal you can sell it, basically. Even if we were out of the single market, for most products you'd be able to sell into Europe, perhaps at higher cost and perhaps with more complexity but it would be possible.

In FS you cannot sell cross border unless you are regulated in the EU. Currently this means if you meet your own country's regulatory regime and it is part of the EU, you have a passport to sell across the EU. Almost all UK financial services will be regulated by the FCA and passported that way. If we are no longer in the EU the FCA won't be recognised and no one from here will be able to sell into Europe. It just won't be legal. It's not a question of higher cost or more complexity. It just won't be legal. So we'll all have to go and find another EU jurisdiction to get passported through. For the banks it's fairly easy to switch to Frankfurt and carry on as before. For smaller firms like ours we'll have to look at opening an operation in the EU for passporting purposes.

I think lots of people thought the banks were sabre rattling but thflats because lots of people don't know about the regulatory regime we work within."

By a poster called BackingVocals, I'm sure she won't mind me c&p'ing it here.

Those quoting the 13% vs 3% are using the idea that we would be more hurt in an all out trade war. Well, yes, of course we would. However why would there be an all out trade war? German and French GDP growth are an anaemia 1.3% do a 3% drop in trade could easily push them into recession, especially with the multiplier effect of several of their large banks failing.

Most in Europe, especially Northern Europe, want a smooth exit with the least economic shockwaves possible. Banks and large industries will not support vengeful politicians.

The point of us as far as US, China are concerned is that we are the springboard to the EU. Out of the EU we are f all use to them, as we're a small market comparatively. They will go straight to France and Germany now as that is where the power is, and that is where the investment will go.

Assuming we keep free trade with the EU we can negotiate trade deals with China and the US that the EU has not been able to. Potentially that can strengthen the position of the UK.

The negative glass half empty attitude is just draining and is the real threat to the UK long term whether we are in or out of the EU. We need positive creative thinking now not handwringing over how the UK is in decline.

Those quoting the 13% vs 3% are using the idea that we would be more hurt in an all out trade war.

Can you point to who is doing this because I don't see anyone suggesting that there will be an "all out trade war" at all - just that the UK has more to lose, and consequently less power in negotiations.

There may be a "trade war" of sorts in financial services, but it seems to me that much of this will happen before negotiations even get under way - Paris is already aggressively touting for financial services business, and at least one German city has been actively looking to encourage start-ups to relocate.

Misti,

It is the idea that negotiations are about 'power' that suggests a trade war. Both sides have the most to gain from free (or close to free) trade. It is not a them and us type of deal unless we have a trade war.

As for Paris for financial services, I cannot really see it. Where would it be? Centred around the Banque de France? La Defence? Working until 8 until of 7 for the same US overlap?

Nothing is impossible but there is a lot of inertia against it. It takes years to set up a newly fully cabled decent sized dealing room.

Mistigri the EU has lots to lose also and money wise it is a greater amount. Of course other countries are vying for business, that is totally to be expected. But the reality is in the short term we will have to agree to the terms that are set anyway in relation to the simple stuff that has been discussed previously. As others have pointed out there are only two years and there are more important details to be thrashed out than free movement of people and labour.

Nothing is impossible but there is a lot of inertia against it. It takes years to set up a newly fully cabled decent sized dealing room.

And there are I imagine other potential options other than moving all operations wholesale to another country. Plus there has to be potential that it's not absolutely impossible that the EU could agree to change the law and continue to recognise the FCA. The real issue is that they probably don't want to.

Yes, it is potentially a lose-lose situation, but nevertheless the UK has more to lose.

In addition, it's clear that some EU nations see this as being, potentially, beneficial for their financial services industries.

Yeah but all EU countries will have to agree, hence it will about the detail of how it will work I think initially rather than negotiating deals as such as 2 years is a short time. The Greeks are unlikely to want financial services in Germany...... In the long term it may well be win-win though if all goes well. Let's stay positive.

I saw this pbs.twimg.com/media/CmwXJT8WcAA_LkB.jpg
regarding the range of post-Brexit options. Makes sense to me, but would appreciate comments from experts more knowledgeable posters.

I am curious to know what the likes of Misti think both the uk and ec want as a 'Brexit'. Personally I think the uk will want close to status quo with some restrictions on free movement of labour from some countries. The ec will want the closest to status quo whilst disincentivising others from leaving.

So the end game will be some restrictions on movement from certainnationsand some duties and extra paperwork on certain goods and/or services.

Some posters ideas that the ec will cut off its nose to spite its face are wide of the mark (imo). It also risks nations making their own bilateral deals with uk.

Larry, I can't comment on the practical aspects of moving a full-scale trading operation as I am not in financial services, although my employer recently moved its small trading operation out of London with little difficulty. But - "years", really? Forgive me for being sceptical. I imagine that Cote and Manon are better placed to comment on this.

Even if companies are deterred from moving large operations (unless they have to - in which case necessity will be the mother of invention), the UK economy will still be damaged if it becomes more attractive/ less risky to locate any new business inside the EU instead of in the UK. This goes for manufacturing too of course. For a multinational, brexit increases the attractiveness of locating new capacity in continental Europe rather than the UK.