At a financial conference this week in the City of London, Britain’s equivalent to Wall Street, four eminent executives and business experts on a panel were asked whether they thought the country actually would ever leave the European Union, as voters mandated in a referendum June 23.
Two thought yes, one no and one voted “it’s so hard to say.” But all were convinced that the City’s march to global business supremacy would continue as if the vote never happened.
“It’s not as if the whole of financial services are going to transfer to Paris or Frankfurt,” Baroness Sharon Bowles, a former member of the European Parliament and a director of the London Stock Exchange, said with a faint air of condescension. “They’ll never replicate what we have here.”
The City, colloquially known as the “square mile” — it’s actually 1.1 square miles — is one of the most densely packed assemblages of financial talent in the world, home to more than 400,000 bankers, traders and support staff.
It’s not as if the whole of financial services are going to transfer to Paris or Frankfurt. They’ll never replicate what we have here.
Since the deregulatory “big bang” of 1986 launched the City on its path to global prominence, its denizens have acquired the image of a class convinced that the world needs them more than they need the world.
That brave notion has been much on display in the City since the “Brexit” vote, which threatens to sever 40 years of trade and business links between Britain and the EU’s other 27 members. On Monday, Chancellor George Osborne, the government’s senior financial official, said that Britain’s economy and financial talent would enable the country to start the two-year negotiation over a breakup “from a position of hard-won strength.”
At the annual conference Thursday of TheCityUK, the financial industry’s lobbying arm, speakers and guests exuded the same confidence.
“Access to the U.K. market will be in demand and highly prized,” McFarlane said. “BMW, Renault and Airbus will wish to continue to export their products to the U.K. tariff-free.” European politicians determined to punish Britain for leaving the EU will be hurting only themselves, he said: “A strong U.K. strengthens the world and advantages Europe.”
Finance executives have been setting forth what they hope to gain once negotiations begin. Under EU rules, talks on terms of the breakup would start only after Britain formally invokes Article 50 of the union’s 2007 Lisbon treaty, signaling its intention to leave. British leaders have said that might not happen until early next year, if then.
McFarlane listed the business community’s goals succinctly: “access to the single market, some restriction on the free movement of labor, ability to employ talented workers from Europe and the rest of the world, priority for financial and professional services.”
In other words, almost all the privileges that British-based firms have now as members of the EU — duty-free trade between Britain and the EU and the preservation of “passporting” rights that enable financial firms to serve clients throughout the entire EU from offices in Britain without being subject to the target countries’ regulators.
Not everyone in the City is equally sanguine about its being so powerful a force that it can dictate demands to the EU even after a breakup. Some recognize that the bankers’ sense of entitlement may even have helped energize the “Leave” campaign in the British countryside; some also are starting to understand that the number of Leave voters who are regretting their vote on June 23 may not be all that great.
“The only place you hear talk about ‘Bremorse’ is within the London bubble,” said Tom Frackowiak, an executive director at Cicero Group, a City financial communications firm. “But London is the worst place to have this debate. Out in the country, everyone is still saying, ‘Yeah!’ ”
Nor are City bankers invariably content with the EU relationship as it is today. Bill Tonks, an executive at St. James’s Place Wealth Management, says his firm has turned its focus to serving clients in such Asian money centers as Hong Kong, Singapore and Shanghai in part to escape the burden of rules and regulations emanating from Brussels and other European capitals.
“We passported into Spain to serve expatriates there,” he said.” But even though our clients are British, we still have to translate every document into Spanish.”
The real question facing the City is whether all Britain will go along with the concessions that might be needed to secure its continued access to the European market.
Britain’s dues to the EU, the obligation to accept unlimited immigration of EU nationals and compliance with rules and laws enacted in Brussels were raised as issues during the referendum debate, and a majority voted against them.
Of course, bankers, brokers and traders aren’t professionals that the average Briton is willing to make sacrifices for. Financial services are “less trusted than any other industry in the U.K.,” Brian Ledbetter, a consultant at McKinsey & Co. working on a study of future options for TheCityUK, told Thursday’s audience.
Yet at least the City can take some comfort in the fact that if there’s an economic meltdown in Britain as a result of the Brexit vote, it’s innocent. “This is a political crisis,” McFarlane said. “Unlike the previous crisis, the City does not bear the accountability. We have experienced an exogenous shock, and have acquitted ourselves admirably.”