What should Theresa May, when she speaks on Tuesday about her plans for the UK’s exit from the European Union – say about the City and financial services? As an opening pitch, she should take her cue from the governor of the Bank of England and remind the EU 27 that the UK – if only in this single commercial field – holds a strong negotiating hand.

Mark Carney first made his point about the UK being “the investment banker for Europe” in November and last week’s reiteration put hard facts on the table for a second time: “If you rely on a jurisdiction [ie the UK] for three-quarters of your hedging activities, three-quarters of your foreign exchange activity, half your lending and half your securities transactions you should think very carefully about the transition from where you are today to where the new equilibrium will be.”

Quite. The dominance of the City of London within European financial services is enormous and, in one sense, unsurprising. In big wholesale financial markets, trading activity tends to concentrate in order to keep costs low. This liquidity effect reinforces regional leadership, especially in age of international trade. Some £440bn of contracts are cleared daily in the UK.

If the other EU states, at the moment of Brexit, tried to grab too much of the business dominated by the City, chaos might follow. The cost of capital and the cost of trading could increase for many continental firms in the so-called “real” economy because the continental European banking system is simply not equipped to deal with a sudden transition.

Frankfurt, as UK bankers have reminded us many times, is a city of only 700,000 people. Over the course of a couple of decades, it might be able to become the EU’s financial hub, but the process couldn’t happen overnight. Paris, being much larger, is a better medium-term prospect, but at the moment it isn’t clear that the big French and German banks – as opposed to a few politicians in those countries – want to relocate anywhere.

A bigger obstacle is regulatory. All that wholesale financial activity needs to be policed, and the bulk of the expertise is in London. It is also clear who stands behind the Bank of England, the UK’s chief financial regulator – it is the UK government and, ultimately, UK taxpayers. Who stands behind the European Central Bank? A collection of 27 national governments and taxpayers, which leaves plenty of room for disagreement in the event of a crisis along 2008-09 lines.

The practical difficulties in shifting Europe’s financial centre explain why the Jenga analogy – used by HSBC chairman Douglas Flint and endorsed by Carney – is powerful. It is safe to remove a few wooden blocks – or areas of financial activity – from the tower, but you can never be sure at what point the whole construction will come crashing down. Brexit still posed risks to financial stability in the UK, Carney argued, but the threat to the EU 27 would be greater if London-based international banks could no longer gain easy access to European countries and corporations.

Therein lies the case for a transitional deal, and also a permanent arrangement that suits both sides. Michel Barnier, the EU’s chief negotiator, is open to a “special” relationship with City post-Brexit, according to minutes of a meeting seen by the Guardian. There needs to be work “outside of the negotiation box … in order to avoid financial instability,” he is reported to have said.

The prime minister should seize the opening. In most areas of trade, the Brexit negotiations will be hideously complicated, not least because the EU 27 cannot be seen to be too generous to the UK. But, in financial services, the EU 27 risk damaging their own competitiveness if they play rough with London. The path towards mutual self-interest ought to be obvious. The sooner the first steps are taken, the better.

Inflation shock won’t be much comfort to anyone

It has been a miserable start to the year for economic forecasters. Lampooned in 2016 by Michael Gove and other Brexiters, they began 2017 with yet more criticism, for predicting the post-referendum slump that never was. Even the Bank of England’s chief economist, Andy Haldane, said his profession was in crisis.

This week could bring some solace to experts who insist the economic pain of the Leave vote has been delayed, not averted. A deluge of figures this week will shed light on pay, jobs, prices and our willingness to shop since the Brexit vote sent the pound tumbling.

Inflation figures on Tuesday are key to gauging how much a surge in import costs is being passed on to consumers. We already know factories are paying much more for materials and energy thanks to a weaker pound and a higher oil price. The City view is that inflation will tick higher from November’s two-year high of 1.2%.

On Wednesday, labour market figures may provide clues as to how far pay growth can keep pace with these rising living costs. Wages are increasing in real terms for now, but few see this trend continuing to the end of the year as employers decide they cannot, or do not need to, award big pay rises. Unemployment is expected to stay low but economists will be watching for a further slowdown in the pace of hiring as nervous firms brace for Brexit talks.

Finally, retail sales figures on Friday are expected to show that Britons kept on splashing out in December. Expect to hear the optimists say consumers are shrugging off Brexit. The pessimists will warn that December marked a debt-fuelled last gasp for the retail industry before a tough 2017.

In short, the picture will remain murky, with something for everyone to pick from to suit their view. But the pound is still down 18% against the dollar. An inflation shock is coming, and living standards will suffer. There are only faint glimmers of this now, but by the time we see figures for January and February, the pressures of a Brexit-battered pound will be undeniable.

Tidal power good for a government all at sea

Former Tory minister Charles Hendry claimed last week that tidal lagoons would be cheaper than any other form of power across their 120-year lifetime. The reality is that wind and solar are both tried and tested and cheaper today, but for ideological reasons the government has effectively halted their expansion.

With those two sidelined, the last eight coal power stations closing by 2025, new nuclear at least a decade away and ambitious carbon targets looming, it’s hard to see what form of power generation fills the gap and ticks the boxes of security, affordability and decarbonisation. Offshore windfarms and biomass are unlikely to do it alone.

In that context a £1.3bn “pathfinder” lagoon at Swansea Bay, while pricey for what is a small power station, looks like a “no regrets” plan, as Hendry’s tidal power review put it. Given how the government has boxed itself in, anything that can open up a new industry, cut emissions and be built in four years looks worth floating.