06 October 2016
Crossing the River
Brexit – the smell of opportunity.
by J.R.Thomas
The tears have dried; the deleted Facebook friends have been refriended; the plans to move to the Dordogne and live a simpler life shelved… As the pain recedes to a distant memory, the Remainers come nervously from their burrows to find – nothing much has changed. Not quite: now is not a good time to buy that BMW, or to book the skiing trip to Vail; olive oil has become even more expensive; as have coffee beans. The political landscape has changed beyond the wildest imaginings of 22nd June. Mr Cameron has gone; Mr Osborne has gone; Mr Gove has gone; Theresa is Prime Minister; Boris is Foreign Secretary; David Davies is back from the wilderness. Ridiculous that would have sounded three months ago, but now it all somehow seems normal, as though nothing much happened, just a wild dream, a night of shrieks and crashes, towering thunderclouds and horrific lightening, violent rain. And by morning, blue skies, a cheerful freshness, just a few broken branches and damp roads to suggest that there was a storm, not just a nightmare of too much Rioja and Roquefort.
Ed Balls is on Strictly Come Dancing; but he is far from the only politician executing some fancy footwork. Many politicians tell their constituents that they were not that much against Brexiting in the first place; “The EC has become a sclerotic monster, better maybe to have stayed in to reform it, but – hey; look at the trouble it is in. The Hungarians are kicking up no end of a fuss. Mrs Merkel is in deep trouble at home; Ms Le Pen will probably win the first round at least of the French presidential elections. The next economic crisis in Greece rolls in with the winter storms; the same storms will probably hit Italy. And Turkey – c’mon, Turkey in the EC, what a joke. Better out of it, always thought so”.
A few old timers cling to their principles. Kenneth Clarke’s new memoirs remind us of a man who believed in the European dream and still does, and holds other truths to be self-evident, curiosities such as collective responsibility of the cabinet and Cabinet meetings that are discussions among equals to decide policy and how to implement it, not to hear George and Dave report on their intentions and travel plans for the month.
Business is business, Mrs May might well have said; a good businessman, finding one door closing, will hasten to force a new one open. With the pound still twenty per cent off its spring levels, any half decent manufacturer will not need much force to open new doors; he suddenly has a price advantage previously only available in day dreams. Not so good for importers of course, particularly for those importing raw materials to make the goods they intend to export, but even so, there is still a net gain on the whole process. And if you are Jaguar-LandRover or Nissan, or one of their UK suppliers, life looks very rosy indeed, for now. The UK car industry builds cars as well as any in Europe, and now not only with an overseas currency advantage, but also against Mercedes and BMW and Citroen, a big home advantage as well. The only danger is, the thoughtful may have spotted, if life is going to be this good, before long that will reflect in exchange rates as there is a rush to invest in UKplc and that easy price advantage will slip away. Use the time and the profits wisely lads, it will not always be this easy.
And the City? Twenty thousand jobs to go next year? Seventy thousand in the next three years? These are wisps of mist at the moment. The City knows that nobody knows, they can only guess. Some jobs and business will go, of course; the Euroclearing system must go for certain – though it was pretty odd it was here in the first place. The European Bank for Reconstruction and Development will remove its head office to somewhere comfortable and well developed in Europe – but it has few permanent local staff drawn from the UK anyway, and will need to move its key people with it. And the City, having had a fit of the vapours on that extraordinary Friday morning, now scents opportunities. Capital is pouring in from all over the world, to a safe haven offering even better value. The whole mindset of the four hundred thousand or so toilers in the City and Canary Wharf, the whole London wide diaspora of wealth creation and management using paper and mirrors and advanced accountancy, is to think of angles to make more and more money. They have suddenly realised – probably by the Saturday after that Friday – that being outside the centralising bureaucracy of a European supervisory regime that hates investment bankers and all their associated wickedness may well throw up more opportunities than threats. The future at the moment looks east, well east of Europe; and maybe South West, and the boys and girls are learning Mandarin and Mexican Spanish and booking long distance flights.
The City is beginning to think that if there are job losses they will only be those of dislocation; whilst the new markets fall to pin-striped charm and old tricks dressed as sophisticated instruments. But locally run regulation, a government anxious to promote growth and jobs, a refocussing on new markets, a political system free of complex power blocs and able to duck and dive and weave its way; the appeal of that is starting to resonate around the soaring towers.
And how much old business is the City likely to lose? There are more financial whizz kids in Canary Wharf than in the whole of mainland Europe (source: City of London Corporation); not many of the City workforce want to go and live in Frankfurt. Paris is unthinkable – at least if run by M Hollande or Mme Le Pen, and we have seen what happened to M Sarkozy’s previous attempts to change things. Those who could create a financial sector in Paris are mostly in exile in London, and it is most unlikely that they will wish to go home soon. Markets are increasingly less about place and more about talent; the City realised quite a while ago that the long term threat to its hegemony is from rising markets to the east or west. Keep the talent, the markets will stay with the people. If the City’s feet are whipped from under it, it will be by Singapore or Mumbai or New York. Not tomorrow, but over the next twenty years. A major change of attitude in Europe could threaten London – but the lack of that is why we left – non?
This could be all a bit previous; the Labour Party remains pro-European – bizarre for a political party the bulk of whose voters marked the ballot paper “Leave”, but no more bizarre than many other things in Corbynland. The Tory Party in the Commons also has a pro- Europe majority, but Tory MP’s are generally a pragmatic lot and the change of leadership is enabling them to move elegantly on. We are by no means in an easy bit of the river yet; there will be rapids ahead, a waterfall or two, but the national governments in Europe know that they probably need the British as much, more, than the British need them. That message has not yet reached the glass and panelled suites of the Commissioners; but those grand ladies and dignified gentlemen have many great problems coming at them from all sides. The last thing they should do is to pick a fight with leading European politicians. Face-saving compromises will be needed, and will enable them, and us, to move into a new relationship; and common sense will hopefully introduce reforms across the European experiment that changes it, but leaves intact the glorious principles of a people united across a continent. Who knows, we may in twenty years all be sharing a boat once more, rowing in unison. Stranger things have happened.
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