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By Jason Michael
It’s all squirrels at London’s newspaper HQs as the real storm over the prospect of banks leaving the City of London breaks everywhere else. Theresa May’s government is either deluded or trying to keep the country in the dark.
Sterling’s slip against the Euro isn’t the only British divergence from Europe happening at the moment. In Frankfurt and Dublin – two cities preparing to welcome Brexodus refugees – the newspapers are reporting on the plans already in motion to transfer the headquarters of major banking houses out of London. Whereas in London the Sun continues to fixate on Gary Lineker’s compassion for Syrian refugees and the Daily Express focuses its attention on the changing trends in feminine pubic topiary. All mention of the economy in the UK media today, except for a single article in the Financial Times which manages to blame Russia for the banks’ imminent departure, is bullishly predicting a fantastical post-Brexit boom.
Never in the field of international news has so much baloney been sold to so many by so few, but this is the nature of London’s unwillingness to acknowledge the truth of what is going on. Unless the current course of Theresa May’s hard Brexit is altered – and fast – there is one absolutely certain consequence: The banks will move. Anthony Browne, the chief executive of the British Bankers’ Association, has said – according to Reuters – that small London based banks have plans in place for a move out of the UK by December while larger institutions have their fingers poised over the relocate button, ready for an early 2017 exit.
Brexit Britain, in its splendid arrogance, is wilfully disregarding the fundamental rule of finance; that time is money, and every passing moment of uncertainty – with the ongoing weakness of the pound – is costing the banks and (more importantly) their investors hundreds of billions. Britain’s finance minister Philip Hammond – already under pressure to quit over divisions in the government over Brexit – is confident that the loss of the UK’s banking passport to Europe will not damage the City of London’s ability to trade on the continent; hoping to rely on a British equivalence with the EU’s legal, regulatory, and supervisory framework.
The banks, however, evidently see this technical equivalence as a poor alternative to the passport. It does not cover the full spectrum of banking and financial services, it can be suspended without notice, and will require Britain’s acceptance of rules over which it has no control. In short, equivalence promises only more uncertainty. Browne has spelt out the hard Brexit reality that equivalence won’t deter the banks from moving.
The UK has no more than a month to get its house in order before decisions are made by the banks that will have far reaching and devastating consequences for the British economy and the lives of millions. Banking is a team game, and banks and financial institutions behave like a herd. The instant one decides to jump ship the rest will follow. Europe, as was said before on this blog, will always be reluctant to have its financial centre outside the EU, and the UK cannot now rely on European help to stop this impending capital flight. Mrs. May has some serious decisions to make, but we can perhaps suspect that excitement over the opinion of football pundits and women’s pubes was what she had in mind when she said she couldn’t give a running commentary on the government’s plans.
Author: Jason Michael (@Jeggit)
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