Amidst all the faux euphoria surrounding the Tory Party conference, and the press incessantly talking up the idea of Britain leaving the EU, few appear to have noticed the concerns of one part of our economy that is usually at the very forefront of their thoughts - the City Of London, or the financial services industry more generally. This generates £65 billion a year for the Government. It is not a trivial sum.
Royal Exchange, City of London
This sector of the economy generates almost 12% of economic output and 1.1 million jobs. It will support millions more jobs across the country. So it might be thought that it would be of prime concern to the Government to act to protect it from those who would prefer that parts of it decamp to Frankfurt, Paris and Madrid. But, as has been discovered, Theresa May appears unconcerned about the fate of the City after Brexit.
As Bloomberg has told, “British financial-services companies will get no special favors in Brexit negotiations from Prime Minister Theresa May, who wants to change the relationship between the government and the City of London … According to three senior figures in May’s administration, the government will refuse to prioritize the protection of the sector after the U.K. has left the European Union. Her team has also dismissed the key business demand for an interim deal with the EU to help ease the transition out of the bloc, one of the people said”. And Tory MPs are making light of the industry’s concerns.
City AM has reported “Speaking at the Conservative party conference in Birmingham, Leave campaigner Dominic Raab played down the importance of passporting, arguing that several alternative models would allow UK-based institutions to access the market, and allow for the City of London to retain its strength … ‘We could have a deal with is based on equivalence of regulation,’ Raab said, adding that regardless of the nature of a deal, ‘I don’t see a cliff edge for the City. I think it will stay the global leader’”.
That was not how a senior man from Citi saw it “James Bardrick, head of Citi UK, responded that uncertainty around the future is harming financial institutions while they wait for more information on the likely shape of access to European markets”. Passporting allows British firms to trade financial services across the European Economic Area.
And, as the Bloomberg article stresses, “While it’s possible the government may be bluffing ahead of the Brexit negotiations to come, any attempt to keep the City at arms length risks alienating a core driver of the U.K. economy at a time of heightened uncertainty. Banks including JPMorgan Chase & Co. and UBS Group AG have warned they will move jobs abroad if the Brexit negotiations threaten to hurt their businesses”.
Politicians like Raab - Howard Flight is another peddling the idea - airily telling that banks will not need passporting, instead relying on “equivalence of regulation”, does not cut the mustard when it comes to giving reassurance. All kinds of things could be possible. But an industry that yields tens of billions in tax revenue needs to also deal in certainties.
If the Tories aren’t interested in protecting the City, but those on mainland Europe are, then it does not take the application of rocket science to see what not merely could happen, but what will happen after Brexit, with the certainty of night following day.