Tuesday 24 May 2016 8:53 am

Why Brexit won’t be a disaster (and as former City minister, I should know)

As someone who spent 25 years working in finance, four years scrutinising the Treasury as a backbencher, and then two years first as City minister, now as Energy Minister, I've seen at first hand the economic cycles, the disasters and triumphs.

These experiences tell me that the UK has an outstanding future as a free trading global leader if we vote to leave the European Union on 23 June.

The facts are certainly on our side; as the world's fifth biggest economy, and without the shackles of the EU, we will have the opportunity to set up free trade, not just with our European neighbours, but also with the 2.2bn consumers of the Commonwealth, as well as the fast growing emerging economies of the Far East and the Americas.

We have huge strengths, not least that we have the best and most innovative financial services industry in the world. London – rated number one in the Global Power City Index for four years in a row – sits at the heart of this diverse industry that stretches from Aberdeen to Bristol, from Birmingham to Bournemouth, and even to Northampton, a bustling financial services area right in my own home town. An incredible two million people are employed in this enterprising industry right across the country and its potential is vast.

Read more: EU referendum: These three groups could swing the vote towards Remain

A free trading, democratic Britain has SO much going for her! Not only is our language, English, the world’s international business language, but we have the best contract law you’ll find anywhere in the world. Our judicial system is consistently rated as one of the least corrupt in the world. All are enormous advantages for businesses looking to start, expand or move here.

Let me be very clear. EU member states need continued free access to our financial markets regardless of whether we remain politically bound to them or not. The UK accounts for 40 per cent of all wholesale financial markets in the EU, and European businesses depend on continued access to the wealth of expertise and capital that resides here. No financial centre on the continent can even pretend to compete with us – we compete globally, with New York, Singapore and Hong Kong, and that's the facts.

We are a truly global player, and I believe if we have the courage to unshackle ourselves from the EU on 23 June we will find we are not dependent on the EU for our success but quite the reverse – the EU is holding us back, preventing us from realising our full potential in the world.

There is an old saying in the City, “buy on the rumour, sell on the fact”. Translated, this means that there is always financial uncertainty in advance of any kind of "event" such as a big corporate takeover, a Budget, a General Election or a referendum. Traders and fund managers position their books for whatever they feel best protects them.

But the "sell on the fact" part means that once the new reality has arrived (in this case, the result of the referendum), markets settle down and traders, investors, and fund managers get on with their day job – hoping to take their profits. This referendum is producing the volatility that always precedes a big event. Sterling has, unsurprisingly, gone up and down – it's what all floating currencies do, day in, day out. It's also how traders make their money, and there's nothing odd or wrong about that.

I was in a dealing room when Sterling crashed out of the ERM; I was running Barclays Investment Banking team when Barings Bank collapsed due to fraud; I was working in funds management during the financial crisis of 2008. Those were truly systemic events, where there was a real and serious threat to financial stability.

So I'm unimpressed to hear the Remain camp insisting that a vote to leave means sterling will collapse, inflation will pick up, 3m jobs will be lost, and now, the latest scare story, house prices will collapse.

My own view, (not an economic forecast but a real world view based on 30 years of experience) is that if we vote to leave the EU on 23 June, the boost to confidence from our newfound freedoms, the prospect of proper control over the costs of immigration, as well as the £10bn per annum "independence dividend", will boost markets and investment and put the UK on a path to long term economic success.

Read more: Mark Carney defends "outspoken" BoE Brexit comments

Meanwhile, let's keep calm. Nothing will change on 24 June after a vote to leave. The truth is, every bit of EU law is enshrined in UK law, so nothing will change for at least two years while we negotiate the ongoing tariff-free trading with our European neighbours, the arrangements for future immigration controls and caps, and the plans for cooperation in intelligence sharing and counter terrorism.

Don't let anyone tell you these things won't happen. No matter how furious individual European leaders might be that we've had the temerity to opt for freedom and democracy, they still have to get re-elected at home. The European leader who tells Germany's BMW workers, or Spain's Zara staff or Sweden's Ikea employees that they can no longer sell tariff-free to the UK, or who decides not to share information on known terrorist movements, will face disaster at their own ballot box. It is not an option.

So I was incredibly disappointed to see that the very man charged with overseeing our monetary policy, the Governor of the Bank of England, went out on a limb recently, to give some totally biased and indefensible predictions about our economy.

Mark Carney’s political “intervention” into the EU referendum debate has been highly damaging for the Bank of England. For an institution with the very grave responsibility of ensuring the short and long-term stability of the country’s financial system whatever the scenario, the Governor's intervention has actually increased the risk of high market volatility ahead of the referendum.

Read more: Why the smallest firms must make EU politics their business

The Bank of England Act of 1998 makes clear the Governor has independence in setting monetary policy. But it also makes clear he must remain impartial in other policy areas. But if you make a "non-political" statement knowing it will be seized upon by one side in a political debate and trumpeted as evidence of your support, you cannot then hide behind your supposed "independence", particularly if you have chosen to ignore the many other possible outcomes or even provide appropriate caveats. As a sophisticated former Goldman Sachs banker he knew precisely what he was doing.

A balanced assessment would have pointed out that there are many risks to staying in. The Eurozone's debt crisis together with their migrant crisis are ongoing and unresolved issues of great magnitude, that will have huge consequences for the UK if we remain in the EU.

UK voters have a fundamental choice to make: do we remain reluctant partners in someone else's failing project, or do we continue to trade with Europe, yes, but also look outwards and embrace the 80 per cent of the world that lies outside the EU, full of vibrant growing economies and opportunity.

Voting to leave the EU on 23 June is the UK’s best hope for continued success. Let’s take back control.

 

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.

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