Thursday, February 28, 2019

The Cost to the City if Brexit is Stolen

As things stand, the UK will leave the EU on 29th March.

If Brexit is stolen (and make no mistake, any delay is simply an attempt to reverse the referendum), we will lose the opportunity to supercharge and reinvigorate the industry.

Benefits that Brexit brings us and we will lose if Brexit is overturned include...

  1. We will lose the opportunity for better, lighter regulation
    Outside of the EU the City will be able to repeal, revise and avoid regulation that currently makes us less competitive and unnecessarily increases costs.

    We have already seen MiFID2 drive business from the UK to the US due to the excessive administrative costs it has created. We will lose the the ability to address this.

  2. We will lose our commodities markets
    The EU is requesting that the UK charges VAT on commodity derivatives. We are currently being sued by the EU for not imposing this tax, with (of course) the ECJ adjudicating.

    If Brexit if overturned (or worse, we are stuck with May's Withdrawal Agreement - no voice, veto or vote) the UK will be expected to charge VAT in an environment that is already seeing spreads narrow and margins fall. We will lose this business to the US and Asia.

  3. We will lose tax-free transactions
    The Financial Transaction Tax is something our government has vetoed several times before. It was first put forward by the European Commission in 2013.  The idea was revived in December 2017 as a pet project of French Finance Minister Bruno Le Maire  and raised yet again by French President Emmanuel Macron in July 2018.

    More recently Olaf Sholz, German Finance Minister, called for a FTT in a speech in November 2018 (the same speech in which he is reported to have called for France to relinquish its UN seat to the EU, a Eurozone budget and an EU army).

    As a reminder of the potential impact, in the 1980s the Swedish government introduced a series of financial transaction taxes with the end result being that by the end of that decade more than 50% of all Swedish trading had moved to London.

    Within the EU we will lose the ability to resist this.

  4. We will lose Euro Clearing (and jobs)
    The ECB has attempted to prevent Euro clearing outside of the Eurozone on several occasions before. The UK won its case against the ECB's last attempt on a technicality and the court went to great lengths to show the ECB how to fix that technicality.

    We will lose the ability to clear euros (and with it thousands of jobs) within the UK, unless...

  5. We could lose Sterling and be forced to adopt the Euro
    Whether or not you believe the story from Frankfurter Allgemeine that EU officials have discussed plans to force all EU members to join the euro by 2025, Roberto Gualtieri, the Italian MEP and member of the European Parliament's Brexit Negotiation Team, confirmed the general ambition in an interview with Andrew Neil in 2017.

    In this context, it is important to note that non-Eurozone EU nations, voting as a bloc, currently have an effective veto on new European Banking Authority (EBA). This will disappear when the non-Eurozone states fall to four, which now seems likely to happen within the next five to ten years. At that point Britain would lose whatever residual defence it currently has and would be forced to adhere to regulations designed for the benefit of the Euro.

    Given the unsustainability of such a scenario, we would once again be faced with an existential binary choice: join the Euro, or leave the EU. This time however, since we would have had to revoke Article 50 on an "unequivocal and unconditional" basis to get to this point, we would be at the mercy of the ECJ who would decide if we could attempt to leave a second time.

Monday, January 21, 2019

How the #BetterDeal proposal can solve the Brexit deadlock

While the usual suspects fight the same, tired fight over Brexit in Parliament, a group of MPs has attempted to change the narrative by proposing a fresh approach.

The "A Better Deal and a Better Future" offers a realistic solution based on Tusk's FTA offer of last year while reaching across the house to offer a compromise: it crucially acknowledges that a deal is preferable and suggests using WTO rules as a temporary backstop should negotiations not be completed in time for 29th March.

Under WTO terms the UK would be able to continue to trade with the EU without having to impose tariffs or quotas in the interim (the ultimate legal authority to grant such preferences is Article 24 of GATT) and without the need to impose a hard boarder in Ireland. 

The proposal is authored by senior Conservative MPs including Steve Baker, Sir Bernard Jenkin, Sir William Cash MP, Lord Lilley and Marcus Fysh MP as well as noted trade negotiator Shanker Singham. It is also supported by Jacob Rees-Mogg, David Davis, Boris Johnson, Dominic Raab, Priti Patel, Esther McVey and others.

Click here to read more about #BetterDeal.

Monday, January 14, 2019

Why the Government’s Brexit deal is bad for British financial services

The Withdrawal Agreement renders UK Financial Services vulnerable to over-eager EU regulations, with French and German politicians in particular looking to seize the opportunity to introduce a financial transaction tax that would see business move to New York. Meanwhile the forecasts of a mass exodus from the City have been revised down considerably as the institutions and regulators have got down to the business of actually working out what is necessary to manage the change.

We urge MPs to vote against the Prime Minister’s proposed Withdrawal Agreement (WA) for the future prosperity and protection of Britain’s largest and highest employing and exporting industry. 

Saturday, October 8, 2016

Oliver Wyman's Brexit Analysis is Straight Out of the Project Fear Playbook

While the report contains some useful information, it only considers one side of the debate. Osbourne's Treasury would be proud of it.

Brexit presents risks but there are also opportunities. We may disagree which outweigh the other, but the referendum is over and the country voted to leave. We must now put our best minds together and work to realise these opportunities as well as mitigate those risks.

Rather than rehashing the debate, we would rather support organisations such as the Financial Services Negotiation Forum. The FSN Forum is bringing Leavers and Remainers together with the goal of producing evidence-based research that can provide our negotiators with the information necessary to maximise their effectiveness at the negotiating table.

Oliver Wyman's recent report for TheCityUK on Brexit is a relic of the referendum debate. They have made a reasonable job of analysing the current contribution of Financial Services to the country's coffers (albeit with disagreement over numbers - their estimate 1.05m employees conflicts starkly with TheCityUK's own estimate of 2.2m). They have also managed to acknowledge opportunities for the Financial Services industry post-Brexit arising from the "new networks of trade and investment agreements that the UK will negotiate with its partners", although these were only given a couple of small paragraphs.

Disappointingly, they made no effort to quantify these opportunities or include them in their scenarios.

Wednesday, June 22, 2016

Our Top Ten Articles for Brexit

There has certainly been a lot of noise in this debate and one complaint we hear often from voters is the lack of facts and information - from all sides.

However, amongst all the chatter there have been some standout arguments, and a few fantastic speeches, so here is our Top Ten. Let us know what you think we have left out.

If you are still undecided, please follow any of the links below and see if that helps you make up your mind.

Tuesday, June 21, 2016

Fear not Brexit - Gavekal Research

By Charles Gave, Gavekal Research

The UK political class is all in a flutter as the latest European Union referendum polls show an apparent rising tide of support for “Leave”. Having orchestrated the great and good into warning of catastrophe should a Brexit materialize, it would seem that “project fear” is not cutting through. I tend to have strong political convictions and perhaps for this reason I have a lousy record of guesstimating election outcomes. Since the UK referendum debate started, I always felt that the Brits would vote to leave, so no one would be more surprised if I was for once proven right.

City's Euro clearing jobs at risk within the EU

Whilst the threat to move Euro clearing from London to Frankfurt might come under the heading of "usual scaremongering", it is realistic - but only if we stay in the EU.

The UK won its case against the ECB's last attempt to make clearing outside of the Eurozone unprofitable, but it did so on a technicality and the court went to great lengths to show the ECB how to fix that technicality. Once the ECB does as the EU Court suggests, it a can prevent the UK from acting a second time to save Euro clearing in London.

The ECB, however, can only use EU law against London if we remain in the EU. Once the UK is free of the shackles of EU law, the ECB's attempt to rule over us will be history.

Then we can continue to clear Euros just as we clear US Dollars.