London wasn’t built in a day, but by the look of things it will crumble in the twinkling of an eye. England’s decision to leave the European Union has sent sterling in an unrecoverable death spin. Britain is bleeding out.
One has to admire the sheer optimism of the Brexiteers as they cling to a kind of magical thinking; that somehow the large global corporations that keep the British economy afloat will stay in London out of a sense of national pride. London – or rather “the City of London” – is beyond all doubt a financial powerhouse to be reckoned with. By 2009 almost 40% of the world’s currency transactions were handled through London, producing an annual turnover of $675.25 trillion. Financialisation of the British economy was how the neoliberals of the Thatcher era preserved the all but defunct British Empire, and their policies worked – making the UK financial élite some of the richest financiers on the face of the earth.
Brexiteers have imagined that this success has something to do with the magic and romance of London, that the tourist haunts of Buckingham Palace and Tower Bridge have acted as a money tree attracting astronomical sums of money to Britain. This isn’t exactly how finance works. It takes more than a yellow-toothed grin and a pint of Master Brew to make a global financial giant. This is the work of long-term planning and careful capital engineering, the work of the worldly wise banker, broker, investor, and speculator – the class of person who is more excited by profit and bottom lines than he or she is touched by royal piles and old bridges. In real life the money tree is the accumulated intelligence and experience of these people coupled with their unimaginable greed and avarice. More important to these imperialists than lying back and thinking of England is money.
That’s the type of person in charge of Britian’s financial wellbeing, but their clubs – the corporations and financial institutions – are quite something else. Corporations are, by US law at least, considered human beings in their own right, and have the right to such protection under law. What this means in practical terms is that it is illegal for boards to act against the financial interests and securities of the corporations and the capital interests of their investors. In fact the boards of corporations are legally obliged to make money for their investors. Right now, staying in the City of London is losing the financial institutions and multinationals cash by the truck load, and this is a location specific cost.
Between November 2015 and the Brexit referendum the pound was losing steadily against the dollar and the euro, lowering its rate of exchange with the euro from 1.4269 to 1.3099, but the decision of the English and Welsh public to part company with the European Union caused this decline to become a collapse. The pound now stands at a miserable 1.1357 against the euro and has taking sterling to a 30 year low against the dollar. With the trajectory remaining in free-fall there is no doubt the London market is in crisis. With Article 50 on the near horizon, confidence in London’s ability to trade is only going to fall, and continue to fall during the uncertainty of the two year negotiating period. What we have to bear in mind is that the difference between the 1.4269 high and the present 1.1357 represents a 20% drop in the value of all sterling cash assets – globally. No one is going to accept that level of shock without relocating.
This, it would seem, is how Britain’s empire will die. You and I might think that it’s too much trouble for a huge multinational to go house hunting elsewhere, but this isn’t the case at all. These beasts really only truly exist on digital ledger sheets, and moving billions or even trillions of euros to another country – like the Netherlands or Ireland for example – is only as much trouble as changing accounts and the click of a button. The liberalisation of financial regulations has ensured that the speed of capital flight has caught up with that of tweets and text messages. As soon as a big enough fish presses that button the outward rush will begin and London will – like all empires before it – perish.
Post-Brexit UK Economy