French delusions

If France, under president Emmanuel Macron, is purposefully stalling Brexit negotiations in order to steal business from the City of London, it is in for a rude awakening. The strategy appears to be that, if talks can be dragged out, financial services companies will be forced to put into practice contingency plans and will move operations to Paris to reduce the risk of disruption. It is dirigisme par excellence, the very French idea that state action can engineer economic gains. It is also delusional.

While Britain should not be blind to the risk of losing its edge in financial services once it leaves the European Union, and the industry is asking for a transition period, the general tone of the debate has changed markedly since America under Donald Trump launched a blitz against regulation and massively cut taxes. The United States is now one of the most tax-competitive places to do business in the world, and many City firms fear that, unless the UK post-brexit has the flexibility to adapt regulation and taxation to keep business in London, it will flee to New York rather than Paris or Frankfurt. Early, hysterical estimates of how many Uk-based bankers would move to Europe have already been slashed.

Philip Hammond, the Chancellor, and David Davis, the Brexit secretary, are embarking on a charm offensive across Europe in order to persuade member states of the importance of moving talks forward. They should remind their hosts that both sides of the Channel stand to lose out if a good deal cannot be reached. But they should also make clear that there is a world beyond Europe, and that Britain is prepared to do whatever it takes to stay competitive.