Tom Goodenough

Will the City thrive after Brexit?

Will the City thrive after Brexit?
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Ten years on from the crash, the banks have few friends and fewer still who are willing to speak up for them. Now, with the uncertainty of Brexit looming, there are fears banks and their staff could up sticks to the continent. Like them or loathe them, this wouldn’t be good for Britain’s economy: financial services were worth £124.2bn to the UK last year and the sector accounts for three in every 100 jobs in the UK. So what can be done to make Britain a hospitable place for banks to do business after Brexit? And how can we do that without alienating ordinary people? This was the topic of a Spectator dinner discussion sponsored by Barclays at the Labour party conference in Brighton. Guests included MPs, bankers, journalists and policy experts.

Barclays’ Lee Cumbes concedes that there is still a trust issue. Cumbes, the bank’s head of public sector EMEA, also accepts that the regulation of banks before the crash was too light. But is there a danger of this regulation swinging too far the other way and stifling the banks just as Brexit hits? Chuka Umunna MP says the banks undoubtedly caused ‘untold misery and harm’. Yet there is now ‘more personal responsibility’ among those working in the industry, he says. For Alison McGovern MP, it’s not only about regulation; it’s vital, too, she says that we change the way we govern the country. The financial services sector can’t do that on its own.

Much of the banks’ problem is actually rather simpler, according to John McTernan. Banks do a lot of good; they’re the lifeblood of Britain’s economy. They just need to be better at explaining themselves and what it is they actually do. Labour MPs Jess Phillips and Wes Streeting agree. Streeting says it’s a sad situation when one of the country’s leading industries is too embarrassed to go on television to defend itself. ‘We should have some national pride about the fact that we still have the centre of the financial service industry,’ he argues. But when those from the industry make their case, they must use a simple phrase: ‘this matters to people because’. By doing so, says Streeting, they’re likely to get a better reception from the public – and bashing bankers will hopefully fade from fashion.

It’s true that the banks are a big source of revenue for the UK that ‘nobody’s willing to stick up for publicly’, says Cumbes. We’d be wise to acknowledge the investment Britain needs for the future – and banking ‘is one area where we’ve got it right now and we’re threatening it’, he argues.

So how much of that threat is because of Brexit? Gerard Lyons, an economist and author of Clean Brexit, sounds a positive note: the City will be fine, he says. ‘When you've been in something for over 40 years’ as the UK has been in the EU for, ‘you have to be realistic. You can't necessarily leave it easily’, he points out. After the turbulence, though, the prospects look good. ‘The general feeling would be that London remains the financial centre of Europe’, he says. Alison McGovern agrees. ‘If the history of London tells us anything,’ she says, ‘it's that financial institutions are really smart. They'll make things work’.

While talk of a sudden exodus might be overblown, there is a danger that jobs in the sector could gradually slip away from the capital. Barclays’ Peter Gordon says that, over the next decade, ‘we might lose the battle to New York… to Paris and elsewhere’. He argues that the key thing to avoid this is continue access to the single market. That’s the ‘pinch point’ of Brexit, he says.

Dr Swati Dhingra from the LSE agrees. It’s market access that matters, she says. Take Swiss banks: there’s a reason they base themselves in Britain rather than closer to home. They do this because Switzerland’s status outside the EU means it doesn’t benefit from the same access as the UK does currently. ‘It’s also about future regulation,’ says Dhingra. Brexit will inevitably change the way banks operate in Britain. But how? We still don’t know. It’s this uncertainty of current and future regulations that matters for investments coming into the sector and the predicted negative economic impacts, she says.

It’s time for our politicians to speak up for financial services, says John McTernan, who argues that bashing the banks at the same type as we expect them to fire up the country’s economy in the wake of Brexit won’t help anyone. ‘We want to blame the banks for crashing the global economy, but we'd quite like to have our wage growth back, thanks very much. We'd quite like to have our public services funded by buoyant taxation again, thank you very much,’ says McTernan.