It’ll take blood, sweat and toil but Brexit can work for the City
June 30, 2016
I cannot pretend otherwise: it was with dismay that I watched Thursday night’s EU referendum results unfold. My view that Britain should remain an EU member was less a tactical position than an authentic, passionate and long-held belief, as well as something I felt was firmly in the City of London’s interests. As I watched my constituency count, it was clear that the vast majority of my central London constituents shared that view.
Nonetheless the British people have now spoken, and in record numbers. There can be no question of not respecting the referendum’s result. The UK’s position on EU membership is settled – it is time now to unite and make this work.
We should be in no doubt that this can work. It was a consistent disappointment of mine that our nation’s relationship with the EU was presented by both Leave and Remain camps as a black and white issue, with doom under one scenario and sunlit uplands greeting the other. The arguments were always more nuanced and finely balanced than that. Yes, Brexit heralds a period of uncertainty but even as a Remainer, I always recognised that it would not be catastrophic for the City. After all, its relationship with the EU has not been an easy one since the financial crisis. A steady series of Directives has risked undermining London’s position as the preeminent European financial centre, and despite the Prime Minister’s best renegotiation efforts, there would have been ongoing tension between Eurozone and non-Eurozone members.
Our first priority in this brave new world must be reassurance. While on the one hand everything has changed, in many ways it is business as usual. The unstitching of our relationship with the EU will not happen overnight and in the meantime we maintain access to the single market. Insofar as there is uncertainty and turmoil, it applies as much to the future of the EU as it does to Britain’s outside of it. It is hard to see businesses uprooting from London to Paris, Frankfurt or Dublin when so many questions lie unresolved on the continent. The months ahead will likely bring a fresh round of Greek crisis, as well as major problems for Italian banks, while 2017 heralds French and German elections at a time of unpredictable popular dissent over migration. Britain’s exit from the European Union may come to be seen as one of the few certainties in these tumultuous times.
Meanwhile leading lights in the Conservative Leave camp have moved rapidly to assure that Brexit does not amount to the UK being less united or less European, more nationalist than internationalist. On the contrary, Britain’s future will be about looking to and beyond our continent to build new trading relationships, while welcoming talented EU and non-EU migrants to these shores in equal measure. This is an agenda that I fully back as a Remainer, particularly after campaigning vociferously to bring top City professionals and academics to London from America, India, China, Australia and the like after the immigration cap.
But broad-brush confidence and vision need urgently to be complemented by hard and patient work on the detail. Maintaining an effective ‘passporting’ regime is a critical priority for the City of London, allowing our banks access to EU markets and ensuring we remain the primary European centre for Euro-denominated trading. Until Lord Hill’s resignation, we held the EU commissionership on finance, and we therefore have a detailed understanding of the complex issues and personnel at play in this field. We must exploit this key knowledge of the other negotiating team quick-fast.
We need also to maintain as many advantages of the Single Market as are compatible with fulfilling the immigration pledges made during the referendum, alongside a credible interim trade policy. The City and the nation’s capacity to market itself globally as a gateway to the rest of the European Single Market helps us attract foreign direct investment from across the globe. US, Indian, Japanese and Chinese multinationals will only ramp up their trade with the UK if they are confident that their investment on these shores opens the door throughout this region and timezone – we must seek to maintain as much access as possible.
A stop-gap solution may be to find a Norwegian-style compromise, joining and paying the membership costs of the European Economic Area to assure business and investors while we transition out of the EU. As Vice Chairman of the Conservative Party, I have spent the past year engaged in patient relationship-building with European allies, particularly in Germany and the Nordic countries who appreciate that a good deal and hard-nosed compromise is required on both sides.
Finally, the City of London has long benefited from its split personality as an onshore centre for the domestic European market whilst simultaneously offering the offshore model of competitive tax rates, regulatory arbitrage and the distinct selling point of a respected system of law and a skilled workforce. Brexit will clearly hinder the former, so the real challenge now is to enhance sufficiently the latter, particularly in this transitional period where we remain bound by EU regulations. Once the new Prime Minister and ministerial team is in place, we shall need urgently to look at bold measures on tax and regulation that promote confidence and make light of Brexit’s opportunities.
It will take blood, sweat and toil to secure the most practicable deal for the Square Mile and the UK. While I wished to Remain, I have every faith in our nation’s ability to take a bold, positive grasp of a Brexit future.