Britain and Switzerland line up trade talks as visa deal is extended

A combination of factors are to blame for the fall in the number of jobs in the financial services industry

BRITAIN and Switzerland will begin talks to strike an improved post-brexit trade deal within months as negotiators agreed a three-year agreement to allow visa-free travel for bankers.

City workers will enjoy permit-free travel to Switzerland for up to 90 days a year under the extended deal as the two sides gear up for negotiations for a new free trade agreement.

The Department for International Trade said talks on a deal that built on the current Uk-swiss trade agreement were expected to begin next year amid hopes of improved mutual access for the two countries’ large financial services sectors.

Hundreds of thousands of workers are expected to benefit from the threeyear extension to the Services Mobility Agreement (SMA), which was initially due to end next year after being agreed for a two-year period.

Kemi Badenoch, the International Trade Secretary, said: “The UK and Swiss economies are both services powerhouses and closely aligned. Today’s agreement is a win-win for both sides.

“From financial services in Edinburgh to cyber security in Wales, the deal ensures UK businesses capitalise on the huge opportunities on offer.”

Chris Hayward, policy chairman of the City of London Corporation, said visa-free access was “hugely welcome” and urged negotiators to agree to an expanded version of the SMA in a trade deal. He said: “The UK and Switzerland are the two largest financial centres in Europe, which means strengthening

our services trade relationship is a top priority for the sector.”

An enhanced deal with Switzerland would be a boost for the City as Britain is the second-largest services exporter in the world and Switzerland is the country’s sixth-largest export market for services, worth more than £12bn last year.

Britons made 383,000 business trips to Switzerland while Swiss residents made 229,000 work visits to the UK in 2019, before the pandemic hit international travel.

Miles Celic, chief executive of Thecityuk, a lobby group, said the visa agreement was a great win for financial and related professional services, adding: “These are Europe’s two key financial centres and ensuring services workers from both countries can continue to benefit from visa-free travel for up to 90 days is a significant step in deepening this important partnership.

“Eyes should now turn to agreeing what could be a ground-breaking agreement between the UK and Switzerland to secure cross-border financial trade and a free trade deal that builds on the SMA to further enhance mobility arrangements.”

‘One side blames it for everything, the other refuses to recognise it might even be a problem’

After a few brief months when domestic politics was so utterly bonkers that we forgot to argue about Brexit for a bit, the UK’S relationship with the European Union appears to be back on the agenda.

Just in time to add fuel to the fire comes new research showing there are now fewer people working in the UK financial services industry than at any time since the Big Bang more than 35 years ago. There are 51,000 fewer jobs in what could loosely be defined as the City compared with June 2016, when Britain voted to leave the EU.

What’s more, if the expansion of financial services employment had kept pace with growth in jobs in the rest of the economy since then, it is likely that there would be somewhere between 85,000 and 105,000 more people working in the industry today than there actually are, according to research by the think tank New Financial. What’s going on?

That range contains what might be a familiar number. A report by PWC before the referendum claimed that 100,000 workers would relocate to the Continent in the event of Brexit. So, has Project Fear come to pass?

Not quite. The popular concept of a City exodus was always at variance to what would likely happen following Brexit. Yes, some bankers would have to move the EU to perform functions that the UK’S departure from the single market meant could no longer be done from London.

But the bigger issue was a gradual shift in jobs rather than personnel. Finance is a high-churn industry. The worry was that those bankers who quit their jobs in London for whatever reason would be replaced with the creation of new roles in Europe.

Sure enough, Brexit appears to be a factor in the decline in City jobs, but it is far from the only one. Yes, there have been some relocations and a lack of inward investment in financial services amid the uncertainty and political turmoil of the last few years.

But companies have also been off-shoring support staff, investing in IT systems, closing bank branches and shifting online. All these trends have hit British-based jobs. The success of fintech has played a part too: the more this sector grows the more jobs in traditional finance it replaces. (By the way, that’s what the process of increasing productivity looks like.)

The impact of Brexit on the City has therefore been a microcosm of its impact on the wider economy. It’s part of the mix but by no means the only, or even the most important, challenge.

“There is no single reason why the number of jobs in financial services in the UK has been falling for the past few years, but we think there are a number of interconnected factors at work,” says New Financial’s William Wright. “The global financial services industry has had a bruising few years, but this effect is not happening in most other comparable markets.”

The research is admirably nuanced. This is to be welcomed when the debate about Brexit has been entirely polarised for the past six years. One side blames it for everything, the other refuses to acknowledge it might even be a problem. The truth lies somewhere in between. Are we ready to have a grown-up discussion yet? On the face of it, recent developments don’t give much cause for optimism.

Over the weekend, reports suggested the Government was open to negotiating a Swiss-style trade deal with the EU. Hardline Brexiteers were predictably indignant – despite many having argued for precisely such an arrangement before the referendum.

Well, they can rest easy because the UK is not going to get a Swiss-style deal. There are two main reasons for this. One is that there is no such thing as a Swiss-style deal. The relationship would be far better described as a process of almost constant negotiation involving something like 120 mutable agreements.

The second reason why the UK won’t get something similar is that it’s an arrangement that the EU finds rather tiresome and is very unlikely to duplicate. It can frequently be suboptimal for the Swiss too.

Some of the most fractious of the myriad bilateral treaties cover, you guessed it, financial services. For example, the EU allowed the recognised equivalence of the Swiss stock exchange to lapse in 2019 (partly because it was worried about setting a precedent for the UK).

Brussels has spent months quarrelling about whether to continue granting market access to Swiss banks and only recently kicked the can a bit further down the road. Given the importance of the City to the UK economy, the Government would be nuts to sign up to a deal that allowed Brussels to withdraw access on a whim.

That all said, those of an optimistic frame of mind might find it encouraging that the Government feels it can at least start flying kites about the possibility of talking to Brussels about improving relations.

We are in an economic hole at the moment. Brexit is not the only reason. It’s not even the main reason.

It therefore stands to reason that improving trading relations with the EU, even if it is one of the world’s biggest markets that happens to be on our doorstep, won’t get us out of the hole. But it could provide a step up. And, given the economic turmoil ahead, that’s surely got to be something worth pursuing.