25 September 2016

Financial Times: City of London fears May government is shifting towards ‘hard’ Brexit

The sources fear policy is being shaped by pro-Brexit ministers like Liam Fox, international trade secretary, who said in July that Britain would probably leave the customs union, and Brexit minister David Davis, who says it is “improbable” that Britain would stay in the single market.

“The danger of hard talk now is that it increases uncertainty, reduces confidence and will result in businesses triggering their exit plans from the UK,” said John McFarlane, chairman of Barclays and TheCityUK lobby group. [...]

One Wall Street boss expressed concern that Mrs May did not fully grasp the consequences for the City of a “hard Brexit”, while other financiers claim civil servants are afraid to speak up to explain the broad risks of leaving the EU’s economic core.

Meanwhile John Holland-Kaye, chief executive of Heathrow, warned that leaving the EU customs union would “add massive overhead” for businesses and port operators. “Can you imagine operating something like the Euro[tunnel] if you had to suddenly build in all these checks in place? It would be completely unmanageable,” he told the FT.

One banker said that pro-Brexit ministers like Mr Fox and Mr Davis had yet to engage with the City. “If you try to discuss detail with them, you are dismissed as questioning the merits of Brexit,” said one.

Whitehall insiders say that while Philip Hammond, chancellor, is fighting for the City, a rupture is inevitable: “Of course we will end up out of the single market and customs union,” said one. “It won’t be great but we will get the best possible deal.” [...]

But the Brexiters’ push for a break from the single market and customs union stance has caused irritation in the City. “Why is that in anybody’s interest?” said Mr McFarlane. “[Mr Fox] needs to look at the numbers. There has to be a balance between the rational and the political. It can’t just be politics.”

TheCityUK is preparing to publish a major report on the economic contribution of Britain’s financial services industry that is expected to highlight its importance to European corporate funding, as well as the contribution to UK tax coffers. [...]

Full article on Financial Times (subscription required)

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