Deepening key trade and investment links beyond Brexit will be even more vital against a backdrop of COVID-19 to support economic recovery, according to a new joint paper by TheCityUK and economiesuisse.
The two organisations have collaborated on behalf of the financial and related professional services industries of the UK and Switzerland to set out a template for a next generation trading relationship between the UK and Switzerland now the UK has left the EU .
The paper, ‘Future-proofing the UK-Swiss financial and related professional services relationship’, calls for a trading relationship based on the mutual recognition of regulation and not the EU principles of equivalence. It urges the UK and Switzerland, as hosts to Europe’s largest financial centres, build closer strategic ties, building on their shared approach and outlook to financial regulation, to better coordinate shared objectives in global regulatory standard setting.
The new trade relationship should seek to be a template for the future next generation of trade and investment deals by covering 21st century policy issues such as data and cyber security.
Given the shared interests of Switzerland and the UK and the profile of bilateral trade and investment, this agreement could be achieved swiftly and be a win-win for both countries.
Miles Celic, Chief Executive Officer, TheCityUK, said,
To meet the significant social and economic challenges arising from the global COVID-19 pandemic, it is critical we keep markets open and trade flowing through expanding our international trade and investment links. We have an opportunity here to set a new gold standard for global services trade between two sovereign nations. These relationships will underpin our collective responses to the crisis help fuel global economic recovery over the long term.
“The UK and Switzerland are natural partners for financial and related professional services trade. As the first and third largest net exporters of these services globally, both countries are committed to developing high-quality global standards and maintaining open and efficient markets."
Monika Rühl, Chairwoman of the Executive Board, economiesuisse, said,
The challenge posed by COVID-19 means we have to work harder than ever to help international markets to stay open and allow trade flows to continue. The financial and related professional services industry has an important role to play in providing solutions to government, individuals and companies. We are determined that the UK and Switzerland should be at the forefront of providing such leadership.”
“Our countries already share a substantial trade relationship in both goods and services, but more needs to be done to ensure frictionless market access now the UK has left the EU. Achieving this goal will provide an essential engine for driving economic growth and prosperity. It also presents an opportunity for greater strategic cooperation towards the goal of liberalising international services trade.”
The paper sets out what an ambitious future UK-Swiss relationship could encompass. It provides a template for future agreements and seeks to demonstrate how major financial centres can work together to achieve frictionless financial and related professional services engagement with major benefits to both markets.
The paper set out three principles for a future UK-Swiss relationship:
- Aim beyond continuity to an ambitious future relationship. At the beginning of 2019, the UK and Swiss governments announced that continuity for business post-Brexit had mostly been achieved through a range of bilateral agreements. However, the UK having left the EU opens up the possibility of new trade and investment arrangements which could be tailored more to UK and Swiss needs, particularly for financial and related professional services trade, focused on high standards and the ambition to secure and broaden mutual market access.
- Mutual recognition of regulation should be the objective. Given the comparability of the Swiss and UK approach to financial market regulation and overall supervisory frameworks, the principle of financial services equivalence as applied by the EU would not be suitable for any future bilateral arrangement between Switzerland and the UK. Instead, market access to allow the cross-border provision of financial services should be expanded based on the principle of mutual recognition of each other’s relevant regulations, using home-country rules and based on comparable outcomes rather than on line-by-line regulation.
- Deepen institutional, regulatory and supervisory cooperation. As soon as possible, and before the UK transition period with the EU ends, the UK and Switzerland should sign a Memorandum of Understanding which includes a commitment to support and uphold global financial regulatory standards and a joint approach to support increased liberalisation in trade in services at the global level. The understanding should also include a roadmap towards a bespoke bilateral agreement, or set of agreements, on financial and related services, outlining a mandate and timeframe for the supervisory authorities to deliver such an agreement.
Key facts about UK-Swiss trade:
- The UK is the world’s largest net exporter of financial services ($82.67bn), followed by the US ($63.18bn) and Switzerland ($23.37bn).
- Services make up 80%of the UK’s economy and about 75%of Switzerland’s, with financial and related professional services making up a significant component of these figures.
- Switzerland and the UK have a very close trade and investment relationship, according to data from the Swiss National Bank. Bilateral trade in services totalled CHF19.5 (equivalent to £14.5bn) in 2018, up to CHF17.8bn (£14.1bn) in 2017.
- For services exports, Switzerland is a top five destination for the UK, with more than three times the total value of UK services exported to China in 2016.
- The UK is Switzerland’s sixth most important export market for goods (CHF17.1 billion in 2018) and the third largest non-EU export market, after the US and China.
- For services, the UK is a top three destination for Switzerland in 2018, behind only the US and Germany.