Key figures in the City are growing increasingly frustrated with what they see as an indifferent and unsupportive approach towards the Square Mile in two of the government departments responsible for hammering out the UK’s Brexit deal.
Several sources have indicated to City A.M. that, while Philip Hammond and his Treasury team are instinctively sympathetic to the City’s interests, the Brexit department and the Department for International Trade have given them a chillier reception.
“The Treasury understands the City and, most importantly, is aware of the revenue it generates. The same cannot be said of the other two departments,” a senior City source said.
Iain Anderson, executive chairman at City public affairs giant Cicero Group, agreed that “businesses don’t know who they should be talking to” but that thankfully “the Treasury is the grown-up in the room”.
Another City source said that the Brexit department is more concerned with cutting immigration than it is with securing firms’ access to pan-European markets.
David Davis’ Brexit department was set up in part to ensure that business interests were heard at the Brexit negotiating table but the City is concerned that the department simply does not have the know-how and firepower to fight for the financial services sector.
Although Davis announced in September that the department had “over 180 staff in London, plus the expertise of over 120 officials in Brussels”, City A.M. understands the number focused specifically on financial services is in the low single digits.
The financial sector is increasingly concerned about whether or not a transition period will be put in place, giving firms time to get their house in order while preparing for a new regulatory environment. The policy is understood to be favoured by the Treasury, but it is unclear whether the Brexit departments – or Number 10 – are sympathetic to its aims.
Many financial services companies fear that current government plans for Brexit will involve the wholesale loss of passporting rights, which currently allow UK-based companies to conduct business in other EEA states and vice versa.
A senior figure at a leading City institution lamented: “The Brexiteers want a hard cut-off from Europe. The industry does not.”
The differing stances of the government departments towards the Square Mile reflect fault lines opening up within May’s cabinet over Brexit. Fox is known as an advocate of a so-called hard Brexit and Davis has said that single market membership is “highly unlikely” post the UK’s exit, though No 10 distanced the PM from his statement. Hammond, meanwhile, has adopted a more moderate approach to migration and EU negotiations.
May was forced to say earlier in the week that she had “full confidence” in Hammond, following reports that he was criticised for approaching Brexit like a “risk-wary accountant”.
A government spokesperson said last night: “The government is keenly aware of the importance of the financial services sector to the UK economy… We are determined to maintain the City’s leading position as one of the key centres of global finance as we make a success out of Brexit.”