30 years ago, I worked in the City, pretending to be a stockbroker. I say "pretending" because I was never able to work out what I was supposed to be doing. As far as I could tell, my task was to make up stories that would persuade people to either buy or sell shares, and surely it couldn't be a crass as that? For a long time, I thought there had to be something rational underpinning it all, but eventually I decided that I couldn't see anything. And not long after that, I stopped being a stockbroker.
But while I was there wearing pinstripes, leather shoes, no braces and trying not to laugh, the Big Bang happened, 30 years ago, 27 October 1986. The floor of the stock exchange became deserted, all trading was electronic. And then we had the Michael Fish hurricane on the night of 15-16 October 1987, which was followed by Black Monday, October 19, 1987, the day that A) stock prices plummeted by several percent and B) trading volumes plummeted to a tenth of previous levels.
What followed was a series of amalgamations between brokers, jobbers, banks and other assorted spivs and barrowboys. The City adjusted to the new rules and carried on as before, except they didn't need so many people (including me).
It's all electronic now.
Think about that for a moment, because if everything is electronic, it really doesn't matter where people are located. Except that where they are located, affects what rules and regulations they have to comply with.
With the EU, there's a single market. So if you can trade in one country, you can trade on an equal basis with the other 27. If you're authorised to be a bank in the UK, then you can equally be a bank in 27 other countries.
And then Brexit.
Suddenly, if you're authorised to be a bank in the UK, you aren't authorised to be a bank in 27 other countries.
So, imagine you're on the management board of a large bank that trades internationally. If you're based in the UK, you aren't authorised to do financial stuff in the EU. The obvious solution is to relocate. And you're not going to wait until the day before Brexit Day.
We don't know yet what Brexit means. Yes, Brexit means Brexit, ho ho ho. What a useless definition. There's an important question - will the UK still have access to the single market? Because the cost of that, will be the abandonment of control over immigration from the EU to the UK. And some people are saying that the referendum vote to leave the EU, was a vote to stop uncontrolled immigration from the EU (although that certainly wasn't on the voting slip that I put my X on, so I don't know how people can say this).
If Brexit means control over EU immigration (and, by the way, Theresa May wasn't able to control non-EU immigration when she was Home Secretary, so what hope of doing so in future?) then it means leaving the single market, because the EU isn't going to let us eat the beans and leave the brussels.
And if we leave the single market, then the City will up sticks and move. Probably to Germany, maybe to Brussels. Or possibly to Ireland, where they have an educated english-speaking population very near to London.
Now you might think "Good riddance, it's the banksters who caused the financial crisis", although actually it was the politicians who caused it by insufficient regulation of the finance industry, because you can't expect banksters to refrain from chasing profits. But actually, we'll be just as dependent on the banks in future as we are now, because banking is a necessary service in any economy.
The difference will be that the taxation revenue that the country gets from the financial service industry, will also relocate.
And the City London contributes £67 billion per year in taxes to the government's handbag. Which makes even the famously non-existent $350 million/week on the side of the Brexit bus look puny.
An alternate view:ReplyDelete
“There isn’t another European city right now that has that type of infrastructure to cope with what is going on in the City,” continues Haynes. “Could that change? Yes of course it could, people can build it but it’s not going to be built overnight.”
The changes sparked by the Big Bang have “cemented and made it extremely difficult and sticky to move business out of London”.