Brexit, what Brexit ? While the politicians have been squabbling in Westminster over the semantics of customs unions, the City’s flag bearers are getting on with drumming up new global business for a post-Brexit world.
Which is why on Friday the Lord Mayor of the City of London, Charles Bowman, and the Sheriff, Neil Redcliffe, are heading off with a posse of 16 top FinTech entrepreneurs for a 10-day tour of Australia and New Zealand. And why, as Sheriff Redcliffe put it to me: “We are getting our knickers in a twist about the wrong things. There will be a deal with the EU and the City will innovate, survive and prosper as it has done for centuries at times of great change.
“Let’s stop going around in circles. We need to focus on the bigger challenges ahead like the digital revolution, and the impact this will have on the way we work in future.”
By taking some of City’s brightest tech minds with them, Bowman and Redcliffe hope to do just this: cut new deals as well as collaborate on joint ventures with like-minded businesses in the Commonwealth countries. After the trip down under, Bowman and another trade delegation will head off again over the following 80 days on visits to China, Hong Kong, Chile, Brazil, Japan, Singapore and Nigeria to name but a few countries on the itinerary.
The direction of travel is clear: these are crucial markets for the City. The financial service industry’s exports to the rest of the world between 2007 and 2015 averaged 63% of the UK net financial services exports. ONS figures for 2016 show growth to Japan over that period was 321%, to South Korea 275%, to China 131% and to the US and to Russia, around a third. But the increase in growth to the EU27 was only 20%.
You can see why the City’s ambassadors are out glad-handing around the globe, and why many of them say the Brexit issue must be seen in proportion. The more optimistic among them point out that most firms have already taken out Brexit insurance by moving a tiny number of jobs, but that most City business will not be that affected: up to 20% of the insurance market maybe, but hardly any wealth management or the domestic finance will be badly hit.
Surprisingly, perhaps, there is also consensus within the industry that a free-trade agreement with a bespoke deal for the City which builds on the arrangement between Canada and the EU is the best option. This is what’s being called Plan A, and centres on regulatory alignment that is outcomes based, allowing for mutual access for firms operating between the UK and the EU, and vice versa. Most also accept that divergence for the City is not the holy grail sought by other industries.
Even the Brexiteers agree on this. Daniel Hodson, chairman of The City for Britain, says an FTA including services would fit perfectly within this structure, since many ingredients already exist through case history, and would avoid the systemic risks of a hard Brexit and damage to the euro.
So the City has a plan. But do either Westminster or Brussels have a clue where to go next? It seems not. To date, the Government has not spelled out its negotiating position and Brussels is predictably inscrutable. If the EU plays hardball — or demands money for access which some suggest — when negotiations start in the spring, the alternative is for the UK to walk away and tear up the rules. Ironically, rules that have been gold-plated by the UK.
Fairburn has punt on after-life in LTIP
Who would envy Jeff Fairburn, boss of housebuilder Persimmon? Fairburn is understood to be under pressure from shareholders either to give up most of his £110 million pay package or be sacked.
It’s a tricky decision for Fairburn as he was awarded the bonus under a perfectly legitimate long-term incentive plan (LTIP) share scheme agreed by the board in 2012 and by his shareholders.
Another 140 staff stand to pocket £600 million collectively. They did so well because the housebuilder’s shares rocketed with help from the Government’s Help to Buy scheme while the board failed to cap the maximum bonus. Is that Fairburn’s fault? And should he be the only one to be punished for the idiocy of others?
Investors should take the rap too, rather than moaning now. They should insist that all LTIP schemes be scrapped — in all listed companies — and that executives buy their own shares with their own money.
And Fairburn? His best bet is to consider Pascal’s Wager that it is in one’s interest to behave as if God exists, since the possibility of eternal punishment in hell outweighs any advantage in believing otherwise.
He might also save his soul if he gave money to a new foundation which works with architects to encourage housebuilders to build beautiful houses.