The Brexit deal negotiated by the Tories leader Boris Johnson, which will likely go through if the Tories win a parliamentary majority, represents a hard separation for the UK from its largest trading partner. It will also mark the end of the City’s undisputed reign as the continent’s financial hub and will lead to a fragmentation of Europe’s banking system.
Banks will lose their cherished passports and may have to settle for equivalence regimes in order to do business abroad. These are a substandard and arbitrary framework, completely unsuitable for Europe and the UK’s interlinked markets.
Brexit means the UK investors and issuers are also set for a sustained period of economic decline, according to the government’s own economic forecasts, negating any short-term boost from apparent clarity over when and how it will happen.
Should Johnson stick to his pledge of not extending the transition period beyond next year, during which time the UK will remain in the European single market and customs union, the UK would face no-deal chaos at the end of 2020.
Many in the markets may fear Labour government would imperil the UK and drive away investment, but the Tories are committed to a strategy that will cause lasting economic damage to the country.
At the beginning of the 2020s, the UK will be one of the three leading powers in the world’s largest trade bloc. By the beginning of the next decade, it could be a second tier player dependent on the whims of large protectionist powers in lopsided bilateral trade deals.
The Tory horse that so many investors and bankers are backing is a distinctly Trojan one.