In comparison to animal and plant health, the financial sector has played a rather secondary role in the negotiations between London and Brussels regarding their future trade relationship. This is remarkable because Europe's financial center is located in London, beyond the EU's external borders. It was only in June of this year, seven years after the UK's exit from the EU, that both sides signed a non-binding memorandum of understanding on cooperation in financial services.

As part of this agreement, the Joint EU-UK Financial Regulatory Forum was established, which met for the first time this month. The British financial sector hopes that this forum will not become another talk shop of well-paid bureaucrats but will promote cross-border cooperation, communication, and forward-looking discussions. The City primarily sees itself in competition with New York, not with EU financial hubs.

The appeal of Wall Street extends beyond IPO candidates such as the British chip designer Arm Holdings or the German shoemaker Birkenstock. Many companies also opt for conducting various transactions overseas rather than at their local financial hubs. The deciding factors are not just the higher liquidity but also the lower costs. In the case of euro clearing, Brussels has yielded to the normative power of the factual and refrained from insisting that it takes place in the Eurozone at any cost.

If discussions could focus on things other than the extent to which British financial regulation deviates from EU standards, much could be gained. Rather than comparing the wording of regulations, it would be more sensible to be guided by results. It might then be possible to achieve mutual recognition of the equivalence of regulatory frameworks – not as a favor granted, which can be withdrawn again, but as an expression of trust among equal partners.

So far, there is little indication that this will happen. Instead, it appears to be another opportunity lost to alleviate the challenges arising for Europe due to Brexit. From a British standpoint, the memorandum of understanding signed in June bears resemblance to an agreement with the distant Singapore. However, Britain has not yet distanced itself so significantly from the European continent.