Tuesday, May 24, 2016

Voting to Remain is the biggest gamble we can take with our future

In my job as a private client Wealth Manager, I am often asked at the dinner table what the difference between ‘gambling’ and ‘investing’ is? The answer for me has always been clear. Gambling is allocating money to something based on chance, where the lure of a big reward outweighs the fact you have no control over the outcome. It is also debatable whether society benefits in any way from gambling. Investing, on the other hand, is something where one can make an informed decision about allocating your capital to those that need it, and is often taken in the context of many other informed decisions which helps control the overall range of outcomes. With investing, there is almost always a clear benefit to society, whether it is job creation, tax creation, widget creation, wealth creation….I could go on.

Similarly, the In/Out Referendum is one that presents me with a clear choice between an investment and a gamble.

There is only one major gamble in the EU Referendum, and that is voting to Remain. The EU Project is the world’s biggest casino. As people queue up to join, the front desk staff take their time letting you in, giving the punters outside the impression the long queue means it is the best venue in town. But we know they’ll let you in, because they want your money and the ability to say they have more customers than anywhere else.  Once you are in, Jean-Claude Croupier invites you to place your bets with the tantalising hope you can solve all your problems with a big win. You may win a couple of big hands and get given free drinks all night (that you are actually paying for). However the more you play the more you lose. And soon enough you are being forced to make the bets the Casino wants (£350m a week, ‘winning’ back £100m), not that youwant. The reality is you have no control over where you put your money or how much of your money you are betting.

For the City, the Referendum presents a choice between a gamble and an investment. The UK’s Financial Services industry is the best in the world and is something we should be proud of. The City generates 10% of the UK’s GDP, however the EU does not support it like it supports French agriculture, German manufacturing, or Greek olive farms. The EU is suspicious of the City and so tries to regulate it at every possible opportunity with bonus caps, short selling bans, Financial Services Transaction Taxes, MIFID, AIFMD... Some of this is good, some bad. But it is a gamble as to what the next directive is going to say and how much of our key industry is going to be restricted. The lure of being part of the world’s biggest trade group is what they tell you; the fact is the world’s biggest trade group in reality is….the World. And the City of London is at the centre of this group.

‘Foreign investors’, that all-encompassing term espoused by Vote Remain, do not choose the UK to do business because we are part of the EU. Some do, but it is frankly incorrect to make a blanket assumption like that. The simple fact is that the UK, and the City, are seen by a great many people and companies as the best place to do financial services business in the world. If we Brexit, this will not change. Continental Europe does not support the kind of capitalism that the UK has developed over centuries and which we have exported to much of the world, and there are in fact parts of some EU countries that do not support capitalism at all! We need to control our destiny and invest in ourselves, and not gamble on the EU. The UK has rates of corporate tax and personal taxations that many people around the world would not only view as competitive but fair. We have a strong pool of talent that we employ in Financial Services, and have strong connections with parts of the world which have even more talent for us to choose from (India, China, the US). We speak English, the world’s language, and English Law is respected globally. London is a beautiful, multicultural City with a strong social life, good schools and houses. Why would anyone want to move away from London?

As Benjamin Wrench expertly points out, Financial Services is all about balancing risk and reward. The EU, however, is constantly trying to remove risk from every aspect of our lives, and in so doing removes the reward. Another discussion paper by a leading asset manger said recently that people should avoid falling into the trap of exaggerating the actual ‘harm’ uncertainly does to our economy. Correct! The future is uncertain, whether we vote In or Out. That is a fact of life. Uncertainty and risk are conditions which lead people, companies and countries to achieve great things. Uncertainty, risk and reward encourage innovation and pioneering, and allow those willing to embrace it a huge advantage over rivals. We have the expertise, the track record, the people, the enthusiasm, the geographical and lingual advantages not available to any other country in the world. If anyone has the tool kit to build a great future, it is Great Britain. We should not shy away from these facts and simply say that status quo is safer because the status quo is not an option in this referendum Vote Remain is an unknown gamble that will almost certainly be less successful,voting to Leave gives us more control over our future would be the best investment decision we can take.

Will Dobbs, Wealth Management

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