The word “bleak” isn’t one that many in the City would choose when it comes to the future of our financial sector. Yet that’s how Sir Bill Cash described it in City A.M. yesterday, blaming the EU for damaging the City and warning of worse to come.
But is it really the case that the UK wouldn’t have implemented half of the EU’s major financial regulations if it had been outside? And is the UK’s voice in Brussels as weak as Cash claims?
With a Briton in charge of financial services in the European Commission, it is hard to see it as a Franco-German plot to kill our golden goose. In fact, there is now an impressive alignment of reform-minded politicians in Brussels, giving the UK a huge chance to make it work better for everyone.
The UK government hasn’t been shy about being tough on banks on its own, not “because Brussels made it”. The Exchequer raises £2.5bn a year from a tax on the wholesale funding of banks – that’s five times as much as France and two and a half times as much as Germany, relative to the size of their banking industries. When they haven’t been our own ideas, many UK regulations have been driven by the G20 and the Basel committee on banking supervision rather than the EU.
When rules do stem from Brussels, the UK has largely been successful in shaping them to suit the City. For example, the Trade Finance section of the so-called CRD IV rules was widely seen as a win for British negotiators. And as yet there is no sign of the financial transaction tax which many warned would harm the City.
So what does the financial services sector itself say? A poll by TheCityUK found that 90 per cent of financial sector businesses want Britain to remain a member of the EU; 94 per cent recognise the value of the Single Market and 88 per cent believe EU membership benefits the UK economy overall.
And why do over 250 foreign banks employ 160,000 people in the UK? Among other things, our EU membership offers a financial passport, giving access to all the other 27 EU countries. Would they choose to stay if we left?
Not according to the co-chief executive of Goldman Sachs International, Michael Sherwood: “In all likelihood we would transfer a substantial part of our European business from London to a Eurozone location – the most obvious contenders being Paris and Frankfurt.” Don’t believe him? Several banks have started putting their money where their mouths are and are looking at acquiring property in other EU countries, such as Ireland and Germany, in order to be prepared.
It isn’t only the UK that is asking how EU regulations can work best for them. Former Dutch foreign minister Frans Timmermans coined the phrase “national where possible, Europe where necessary”. Now vice president of the European Commission for Better Regulation, he has already started making good on that promise. As has the EU’s most powerful leader, Angela Merkel, who has called for Brussels to “give something back” to member states.
Now is the time to seize the opportunity to make the EU work not only for the City, but for the rest of Britain and Europe. We often see relations with Brussels through the prism of victory or defeat. Now we are on the winning side, with the goodwill and momentum in place to make a real difference.
City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.