So what will a vote to leave on 23 June mean for our financial services? Simply put, it will be business as usual but with a massive opportunity to leave behind the EU’s “one size fits all” regulation and develop our world-leading industry under a strict and independent Bank of England. Never again should the UK taxpayer have to bail out the banks.
The UK boasts a financial services sector that is the envy of the world. Our advantages – sitting in the time zone between North America and Asia, speaking the international business language of English, having the best contract law in the world and one of the least corrupt judicial systems – combine to make us a financial powerhouse across the globe. More dollars are traded here than in the United States, and we account for 40 per cent of the EU’s wholesale financial markets. No financial services centre in the EU comes anywhere close – our key competition comes from New York, Hong Kong and Singapore.
Although UK policy-makers have always sought to help our financial services industry flourish, recognising its vital role in driving our economy, we are so often hindered by EU policy decisions that try to shore up the euro and deal with the devastating consequences of their project for a European superstate.
In the last Parliament, the Prime Minister negotiated some protection for UK interests from the EU plan for European Banking Union. This temporarily protects us from Eurozone caucusing against UK interests as the euro area seeks ever closer integration. But the direction of travel for the EU is clear, and our national interest will not be protected forever against those of the 19 current euro states, especially as more countries join the single currency.
EU regulations have caused increasing frustration for UK financial services, whether through stopping UK regulators from lifting capital adequacy requirements for our banks to prevent a future banking crisis, or attempts to introduce an EU-wide Financial Transactions Tax which will punish our pensioners and savers by hitting their investment returns to the tune of £4bn.
So the status quo is simply not an option – the EU’s Five Presidents’ Report makes clear the plan is for total political and fiscal union by 2025.
We all know the old City saying “buy on the rumour, sell on the fact”. Volatility in the markets ahead of an event is normal. But having lived through the ERM crisis, Barings Bank’s collapse, the Asian financial crisis and the world financial crash of 2008, we know this referendum is in no way a systemic event.
When we vote to leave, it will be an instruction to the government of the people’s desire to strike a new relationship with the EU, but also to forge ahead with the rest of the world. There will be a smooth process of transition, and all EU rules – already enshrined in UK law – and treaties and trade agreements will remain in place until the period of negotiation is complete.
Businesses across the EU will want to ensure that they retain continued access to UK financial services and there is nothing about voting to leave that would put this under threat. The issue of passporting is a complete red herring as most large financial services businesses either already have a subsidiary in another member state or could quickly and cheaply create one. It may anyway be unnecessary to meet passporting arrangements in future as a result of regulatory equivalence arrangements between the Bank of England and the European Central Bank.
Looking further ahead, once our negotiated exit is complete and decision-making is again a national prerogative, we will be able to work closely with our European friends and allies, supporting their need to defend their currency, but not suffering from the consequences of their inevitable march towards fiscal union.
The UK financial services industry employs 2m people right across the UK from Aberdeen to Edinburgh, and from Birmingham to Bournemouth, with many more in between. It has always looked to the world rather than just to the European continent, and a vote to leave will be a vote of confidence in our amazing talent pool.
We have the skills, we have the confidence, now we just need to take back control on 23 June.