BY DOMINIC WIGHTMAN
Another dinner party. Another Remoaner over-refreshed courtesy of a paddling pool quantity of Sauvignon Blanc… this time the remoaning rant concerning the “imminent destruction” of the City of London because of Brexit.
I confess that of late I’ve been having some rather bad luck with dinner parties. Back in July I attended a dinner in Hampshire at which some remoaner complained that Britain would run out of bog roll like Venezuela after Brexit, to which there was an obvious full-of-it retort which almost escaped my lips. Bang – my wife has a vicious toe-end kick. In the case of the City of London Project Fear drunk, I didn’t bother responding either. My shins are bruised enough. Little is more futile than arguing with a drunk – save perhaps arguing with a toddler or a doe-eyed Corbynista or a spice-addled tramp.
So, let me address the City issue now, for it is an important one… the City supports many thousands of jobs related to forex and security trading and in insurance services as well as making up for much of the UK’s shortfall in goods trading. (UK living standards would be markedly lower if my drunk dinner companion’s predictions of Citygeddon came true.) Not to mention all the related business the City provides in accounting and IT alongside other ancillary service industries. John McDonnell hates the City and it tends to hate him, but sane people with a grasp of basic mathematics appreciate the Square Mile for what it brings the nation.
The drunk was mostly ranting about passporting rights. As a member of the EU, City firms can conduct business across the rest of the EU single market due to so-called passporting. Without the ‘passport’, or something very similar when the UK leaves the EU, that ability will either cease or become much more restricted. Sure, more than 5,000 UK-based firms rely on these passport agreements, but what the drunk failed to mention was that 8,000 European companies also need them to offer services in the UK.
The drunk then went onto the subject of forex and how the City was a declining force in the world of foreign exchange transactions because of Brexit. Good topic – forex is a useful marker for levels of international investment and the buying and selling of goods and services across different areas of the globe. Yet the drunk omitted that in the few years before the EU referendum, the world’s forex market declined due to low world growth and problems in banks. The UK’s share of the forex market fell from 41 per cent in 2013 to 37 per cent in 2016. The City of London still remained by far the world’s biggest forex dealing centre (the US a far-off second on a much lower 19 per cent). Meanwhile the euro saw its share of forex trading slip dramatically to the lowest level since its creation while the European Union’s share of world GDP dropped from 25 per cent to 22 per cent from 2011 to 2016. This was a significant drop, and in just five years. The dawdling economies of Europe with their debt mountains, high unemployment stats and an accumulation of bad credit negatively affected the City of London where the dealing operations of EU member states’ banks are generally housed. The City had a falling share of a falling forex market even before Brexit, partly because of EU economic problems, not because of Brexit.
Next the drunk went on about free movement. How – without free movement from the EU’s educated labour pools – the UK would not be able to recruit the brains required to fill the roles needed to maintain the City’s predominance. As if any UK Government (apart from perhaps a McDonnell Marxist one) will turn away the educated employees the City of London requires…
I do not recall the other points brought up by the drunk. They can’t have been that relevant or lucid and I was put off by them inadvertently spitting on my scallops. Nonetheless, I do remember that the drunk conveniently failed to bring up how the City of London is interconnected to multiple offshore centres where the Queen is Head of State – interrelated nodes so bound to London which other financial centres lack. How being part of the relevant commercial law network – English law – is vital for many financial contracts (take interest rate swaps, the largest traded financial derivatives contract) while English is the main business language. How all UK Governments have steered well-clear of the implementation of a financial transactions tax – which other financial centres’ governments, including those running the EU, seem so keen on – which would dent the City’s competitiveness. Nor did the drunk mention how the City of London’s employees dread the idea of working in soulless Frankfurt or Luxembourg, tiny Dublin or bureaucratic Paris. Sure, the longer Khan is Mayor of London a return by the stock market to the cafes of Amsterdam might be fun … until the drugs wore off.
So, no, even with a no-deal-Brexit, the City is not going to self-destruct overnight or even soon. Yes, some euro business will inevitably be lost to other European centres, but banks are hesitant in moving their operations abroad simply because of the risk and exorbitant costs. The City’s prevalence should be maintained as the Government puts into place an ameliorated tax structure for city firms and woos foreign business like never before (notably the Aramco flotation would be a good start, which would see the flow of hundreds of billions into City coffers even if shared in a co-float with New York).
The sober reality is that it would take a concerted effort by the growing markets of Asia and what’s left of the EU to have contracts altered for another legal system, and that other system would not have the specific aspects essential to transaction viability that have been developed over many decades within the English one; it would take a global effort by London’s competitors to stifle the City and, frankly, there are not enough with the will, or within our handy timezone liked enough by those outside it, to try.
True Remoaners should stop drinking. Drinking only interferes with their suffering.