According to the think-tank New Financial, roughly one-third of the business done in the City relates in some way to the European Union and 20% depends directly on the ability of London-based firms to sell their services using the single market passport.
It is a well-informed estimate but in truth we don’t know how accurate it actually is, and still less do we know how much of that business will remain if the UK severs all meaningful ties with the EU. What we can see is the direction of travel and only yesterday there were three stories which do not augur well.
First, Mark Boleat — the retiring head of the City of London’s policy and resources committee — warned of problems ahead and urged the Government to be much more realistic about the challenges and the level of risk it was taking; second, a senior executive at JPMorgan again talked of hundreds, if not thousands, of jobs shifting to other financial centres in Europe; and, third, there were reports in Marcus Ashworth’s admirable Bloomberg blog that the EU was poised to unveil its plan to force the clearing of financial transactions denominated in euros to move from London to somewhere within the EU — a policy which consultants have estimated could affect up to 80,000 jobs.
True, many still cannot believe this will happen and pin their hopes on being able to operate much as they do now on the basis that the regulatory regimes here and in the EU are equivalent. That may indeed turn out to be a lifeline but there are powerful forces lined up against it.
As a senior Brussels official said at a conference last month in Berlin, the European Parliament has to agree to any deal, and it is not going to accept equivalence as long as the City retains its bonuses.
This is not just envy — the bonus culture is widely blamed for the decline in ethical standards in banking which led to the financial crash; maintaining the bonus culture implies that London has still not learned the necessary lessons which would stop it happening again.
There are other big uncertainties. The forces of globalisation are at present in retreat and no one at this stage knows how far this will go. Perhaps we have seen the high-water mark of international finance — unlikely certainly but history is not linear, and progress is often stalled for decades if not centuries by forces of opposition.
Alternatively, as some Brexiteers suggest, the City could have a bonfire of regulations and become the global capital of mobile international money. The EU might not like that — though there would be little it could do about it.
More to the point, however, is that the majority of British voters would not like it either if they actually realised what was going on. We already have the dubious reputation of being the money-laundering capital of the world — irresponsible finance brought the economy almost to its knees nine years ago. Are people really ready to risk that happening again?
But the chances are that the real outcome will be much less controversial with some business lost but enough retained from the rest of the world for the City to continue to prosper. Some might see that as a result, but what it ignores is the opportunity cost, the potentially huge loss of business which results from leaving the EU at this point just as it is getting its financial act together.
This is because for years now the EU has been inching towards a capital markets union, a huge effort to establish a Europe-wide bond market as an alternative source of finance to Europe’s troubled banks. Completion of that project would have been a bonanza for London; now it may not be completed at all or will be done in a way which leaves London watching from the sidelines.
That lost opportunity could be the biggest cut of all.
Hard-headed but in the right Place
David Bellamy was at St James’s Place the week it launched in 1992, which happened also to be the week Britain crashed out of the exchange rate mechanism. With the financial world in turmoil it seemed an inauspicious time to launch a new business and particularly one focussed on savings and investment, but it has rarely looked back.
Today a quarter of a century on, with his last 11 as chief executive, Bellamy addressed the company’s annual meeting for the last time.
From that standing start it has become a business with over £75 billion of client funds under management, an established position in the FTSE 100, and more than 3000 customer-facing advisors plus a charitable foundation, funded mainly by those who work there, which has mobilised more than £50 million for good causes.
It has been a remarkable journey. Critics attack St James’s Place for the exit charges it levies when customers want to move their money elsewhere.
Significantly though, its competitors rather than its clients grumble the loudest and at a time when much of the asset management industry is facing client outflows, or in the case of pensions having difficulty attracting the money in the first place, its is a formula which works.
Its advisers can sometimes seem too much like the hard-headed salesmen of yesteryear, but clients generally like the level of service and the personal relationships which are the other side of that coin. Its charges may be higher than elsewhere but in return clients benefit from a rigorous selection process which has been better than most at identifying good fund managers.
One feels that if the firm were less successful it would attract less criticism, but as it is, as he signs off for the last time Bellamy leaves behind one of the strongest brands in the wealth management business.