Yes, that was essentially their position. The EU when it was smaller was mostly a group of member states in at least broadly equivalent economic situations. As it has grown, there are much wider disparities, and that undermines some of the original assumptions behind the Single Market.

For example, if there is an incentive to have cheap labour move from a relatively poor economy to a relatively wealthy one, you have potential for abuse on the relatively wealthy side, and you also have a risk of a "brain drain" effect that holds back growth in the poorer economy.

Likewise, trying to unify the markets across such widely different EU states is economically unsound. They aren't really one big market, because basic factors like cost of living and household income vary widely from one member state to another. Forcing businesses to treat all member states equally (which subsequent to that discussion the EU actually has been working to legislate) means you usually price the poorer member states out of the market, which is good for neither the potential customers in those states nor the businesses who would have been happy to supply them.

I also don't see how the UK could conceivably be said to be disadvantaged by the EU - given that financial services + co seem to depend upon EU membership.

The EU is mostly a good thing for trade with the EU. But by belonging to the EU, and in particular the Customs Union, the UK gives up the ability to negotiate its own trade agreements with non-EU trading partners. Instead, it is required to impose the EU's standard tariffs and other non-tariff barriers when trading outside the bloc, and the EU is rather protectionist in its stance there.

Put another way, just as EU membership brings well-documented advantages in terms of tariff-free trade and ease of access to the EU market, it also imposes directly analogous disadvantages in terms of forcing tariffs and other barriers when trading with non-EU markets, and the UK has limited ability to change that situation while remaining in the Customs Union because any relevant trade agreements are negotiated via the EU and not the UK itself.

The argument being made at the time was that since our foreign trade has been shifting steadily towards a greater proportion being with non-EU partners, the balance between the benefits on the EU side and the costs on the non-EU side was shifting in the wrong direction. (And if the EU did then suffer further economic troubles, that would reduce the benefits of continued membership significantly, pushing the balance further/faster in that other direction.)

I think the politics side is really where the UK will find the rub, though. The EU isn't going to be pleased with the UK for leaving. There's a great incentive on their side to make it turn out badly for the UK. Which means it's a little bit like if Mexico got on the USA's shitlist, just so they could get better trade deals with Brazil.

It seems clear that the inability of different EU member states to operate their own fiscal policies while tied to the same currency has caused harm (albeit of very different kinds) in recent years to both Greece at one end of the scale and Germany at the other, and to a lesser extent to various other member states. If the EU was a fully federal system, with combined political/legislative leadership to go with the combined economic/currency ties, maybe that wouldn't have happened. However, I doubt we'll see that level of integration any time soon, because it brings too much other baggage. That being the case, while I don't have the knowledge or experience to judge the odds myself, I can see why some economists might be wary of the same effects that caused so much trouble a few years ago doing so again in the future.

As for the EU not being pleased about the UK leaving, that seems inevitable, but I'm hoping that cooler heads will prevail. Poisoning the well won't help either side, and clearly we're still going to be trading and collaborating in many other ways post-Brexit. We can dig in with red lines about this or that, but NI is still going to suffer economically just like Ireland if they mess the border arrangements up. They can make a fuss about blocking City financial services all they like, but it's their own big businesses using those services and they have no credible alternative based within the EU27, and those businesses weren't just spending all that money on those financial services out of charity.

For myself, it saddens me that the whole affair seems to be characterised more by divisive rhetoric and mistrust now than by a constructive, amicable approach. I take the view that if we're going to have Brexit then obviously the UK-EU relationship will change, but it's still in our mutual interests to collaborate in numerous ways, and I think there were also numerous ways that these negotiations could have gone better if most of the political leadership on both sides hadn't been weak and hostile from day one.

I think this is extremely complacent. Financial services aren't an immovable object like a steel press or a coal mine, they're a bunch of people in an office. A lot of financial companies already have all sorts of European presences (either for tax reasons or through acquisitions), and they're already gearing up to move to Europe. E.g. https://www.telegraph.co.uk/business/2018/01/11/payment-tran...

So much of the UK argument seems to be "once we're out of the EU, the rules that apply to countries that are not in the EU won't apply to us because we're special". This is not convincing.

The whole thing reminds me of Greece: "it would be a disaster for our country if the EU followed its pre-agreed rules, so they won't". This was not a convincing reason to bend the rules.

This is the standard argument, but I don't think it's a very strong one.

You can't pick up and move a steel press, but you can build a new one in a new country. Assuming it's a welcome development, that is mostly just a matter of investment money and building time. Hiring local staff to run it is probably relatively straightforward.

Financial services, as you point out yourself, are all about the people. It's an industry built on experience and knowledge. Obviously today many of those people work in the City and live within range of the City. There is also an ecosystem built around the City to support that work.

As far as I can see, nowhere else within the EU currently has anywhere close to that level of capability and established supporting infrastructure. There are only two ways that is going to change: either large numbers of existing staff from the City or maybe other global financial hubs are convinced to relocate to other member states where the new facilities are being set up, or a new generation of staff is developed locally.

Clearly either of those is possible, as is some sort of hybrid. However, I find the most common argument -- that large numbers of City workers will just transplant their entire lives to a whole different country to keep a job -- unlikely. People talk about emigration to the EU a lot since Brexit became an issue, but the reality is that few people have actually done it while we're an EU member state and it is relatively easy, and it could become a much more significant and permanent change after Brexit. That leaves the alternative of building up a local workforce in some new location, but that also means building a new financial centre to challenge the City. At best that is going to take many years, during which presumably access to big finance across the EU27 would be significantly worse than today, and even then it would be a risky endeavour that might never provide the alternative that people were hoping for.

As I said elsewhere, I hope cooler heads will prevail. The alternative to this is that the EU and UK negotiators grow up and realise that continuing relations in this area is hugely in both parties' best interest. If some deal is reached on financial services then the UK financial sector doesn't take a significant hit, and EU27 businesses and governments can continue to rely on the financial services they need with relatively little change or risk. It's hard to see how any plausible alternative isn't much worse than this in the short and probably medium term.

A chunk of them already have moved country: https://news.efinancialcareers.com/uk-en/231364/percentage-o...

Not a majority, no, but it's inherently a very international business and the more money is at stake the more willing people will be to move.

It matters a great deal what the UK immigration regime will be after Brexit. The government has refused to give any clarity on this, and there are warning signs that the Home Office would very much like to start treating EU nationals as illegal immigrants. If no agreement is reached otherwise, it will be illegal for all those EU nationals to be employed, rent a house, or have a bank account.

I'm not saying it will be an overnight collapse, but more likely a slow melting away of new business and gradual movement of e.g. Euroclearing. In the short term it may be as simple as moving the flag which says where the company's HQ is and moving its taxpaying nexus inside the EU.

You're also underestimating the willingness of those financial businesses which are within the EU to be comfortable with UK competition.

Agreed, and this is an area where the facts seem quite clear and I'm hoping that sanity will prevail by the time the dust settles. In fact, what I'm really hoping is that the whole Brexit mess will force the government to fix our immigration and visa system more generally. It's already insanely slow, complicated and unpredictable for those legitimately visiting or moving here more permanently from outside the EU, and that doesn't really help anyone.

For what it's worth, I have no idea where your characterisation of the desired future treatment of EU nationals as illegal immigrants come from, and I think your predictions here are unlikely to the point of being almost inconceivable. The government might have to pay lip service to immigration controls up to a point, but they've been doing that for years anyway. I can't believe even the current lot are foolish enough to undermine the NHS, the education system, the tech and creative sectors, and so on with the kind of draconian system you seem to be envisaging.

I'm not saying it will be an overnight collapse, but more likely a slow melting away of new business and gradual movement of e.g. Euroclearing.

Perhaps. That's certainly a possible outcome in the longer term. Presumably whatever happens in terms of Brexit, any transition, and then any final deal beyond that, the economies on both sides of the Channel are going to adapt in time.

In the short term it may be as simple as moving the flag which says where the company's HQ is and moving its taxpaying nexus inside the EU.

This I find less likely. Various EU governments, notably including the Germans (albeit under the previous administration), have made it very clear that they don't want to see that sort of "technical" movement. And it's going to be very hard for the financial services firms to play games if the national regulators in their new home state(s) want to cause problems for them.

*You're also underestimating the willingness of those financial businesses which are within the EU to be comfortable with UK competition.

Given the scale we're talking about here, I'm curious to know which financial businesses you classify as being "within the EU" at present.

On the other, what happened to Greece was appalling, and confirmed everybody's worst fears about the EU being an instrument of Capital in overrunning democratic norms.

I don't think it would be so terrible, in any case, if the EU blocked UK financial services (or if the financial services went under anyway, since I think being in the EU was part of the raison-d'etre). The imbalance of the english economy created by an overweight financial sector that employs basically no-one, and has antithetical legislative needs to all the other sectors, is a lot of what's wrong with the UK as a country. We used to make things. Now all we do is flip houses on the back of one bubble or another. The financial sector has created a weird double-country, with a super-rich capital, and basically impoverished provinces.

But this really comes back to what I see as the heart of English dysfunction - and it's English, since the Welsh and Scottish don't seem to share it. The politics are awful. Recruiting half your leadership from one elite boarding school just doesn't work. There's no way you can find enough smart, talented people that way. That's why everything the english state does is always so screwed up. And it's a problem that only gets worse as more power is concentrated in the financial sector.

This is exactly it. To my mind it's the last retreat of the Empire, inwards and inwards. The idea of having a country operating on a fundamentally equitable basis is just not acceptable to these people. So the UK gets set up almost as a set of internal colonies run from Westminster.

> We used to make things.

We still do - with a lot fewer people. Manufacturing is still big economically, it's just a high-value-add industry that employs a smaller number of white collar workers and robots. It also has terrible press coverage because it's not in London, and the papers are unwilling to dispatch foreign correspondents to the Midlands to find it.

Our current political leadership do seem to have a very odd view of the world sometimes, possibly due to most of them (a) being rich and (b) never having worked a normal job outside the politics/media/finance bubble.

It's very frustrating that they seem to have gone into this whole business with such an adversarial stance, particularly when even now they don't really seem to have a clear, consistent vision for what they are trying to achieve. To be fair, several of the key figures on the EU side haven't been any better.