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UK’s reliance on the economic fortunes of its main trading partners in the EU, but also because the City is the main centre of the more complex segments of the euro-denominated markets. The City is essentially the financial centre of the euro, including housing the more complex operations of the euro area’s leading banks, and thus has its own special interest in resolution of the euro’s current difficulties. Much of the professional expertise related to complex euro-denominated business is also concentrated in London; ›› Lack of Influence over Single Market/euro area Relationships the UK has sometimes tried to draw a distinction between the Single Market and the euro, reflecting a concern to be in the one but not the other. But the Single Market (as a whole) is nevertheless integral to the euro project (whatever its current problems). The benefits of the euro project will not be fully achieved for its members and those whose economies depend on them without the efficiencies that the Single Market makes possible. Members of the euro area will therefore always have a particular interest in the functioning of the Single Market, including in financial services. All UK stakeholders need to recognise that it has become a matter of considerable sensitivity that the Euro’s main financial centre is offshore to the geographical euro area. UK interests must be ready – and equipped - to take account of concerns, whether well-founded or not, which arise from this. Equally, governments in the euro area and the EU institutions need to continue to recognise that eurodenominated business is conducted on a large scale outside the euro area across the Single Market and that any requirements which might be placed on euro-denominated business (such as location of clearing and settlement, or policies related to the SSM) must acknowledge this interdependence; ›› Wider Losses of Single Market Facilities free movement of labour is an obvious example. Without it, as has been said, many UK-based businesses would not be able to staff themselves satisfactorily or be able to sell services to customers across the EU in their own language. As well as these losses, there could be other unknowns, such as the degree of willingness among UK domestic politicians to accommodate the needs of the UK financial services sector. It is easy to assume that the UK political climate would always be benign and more ready to countenance a looser regulatory regime than in the EU. But this is not necessarily so, as recent instances of the UK pressing for tighter standards demonstrate. The recent Report by a Parliamentary Commission on Banking Standards is an example of a UK domesticallydriven political viewpoint: its apparently ambivalent attitude to the merits of international regulatory standards (see Volume 2, Chapter 4) illustrates the inherent flux of choices and chances, from which domestic politics is no freer than its intergovernmental counterpart. The Counterfactual Challenge The logic of these arguments is that it will remain important for the UK to: ›› Continue to participate, as a full EU member, in the framing of the Single Market, both in financial services and more widely; ›› Remain engaged effectively with EU Institutions, including the new regulatory bodies and SSM; ›› Press the case for better and more uniform enforcement of rules; ›› Argue the case, when necessary, for better quality legislation achieved through better processes; ›› Proactively participate in the debate over structural reform of the EU (i.e. Banking Union). There are, however, those who reject any such arguments, preferring to suggest that the UK would be better off if it left the EU or negotiated alternative terms for continuing free trade and market access. One view is that the UK could secure some alternative half-way-house regime either as a member of the EEA, like Norway, or from outside the EEA, like Switzerland. The suggestion is that the UK would retain most