Photographer: Chris Ratcliffe/Bloomberg

Hidden Millions Fund the Debate Over Britain's European Future

  • Electoral Commission names official lead campaigners in April
  • Cash raised before Feb. 1 doesn't have to be disclosed

In the battle to win over U.K. voters ahead of June’s referendum on the European Union, the rival "in" and "out" campaigns have been tapping up businesses and wealthy individuals for cash. Just how much, may never be known.

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Rival groups have been in a race to strengthen their positions before April, when the Electoral Commission selects who will be the official "lead campaign" for each camp. The designation comes with 600,000 pounds ($865,000) in public funding, free broadcast slots, and as much as 7 million pounds of spending during the 10-week campaign.

Here’s the catch: each side has pocketed millions of pounds from donors including Goldman Sachs Group Inc., JPMorgan Chase & Co. and hedge fund founders Crispin Odey and David Harding. But most of that cash rolled in before Feb. 1, the date after which donations worth more than 7,500 pounds must be disclosed under Electoral Commission rules.

“We need to know who’s giving the money and who’s trying to influence the debate,” said Darren Hughes, deputy head of the Electoral Reform Society, which pushes for changes to the voting system. "We’re concerned about unreported income because the regulated period is too short."

1975 Spending

Compared to the U.S., British elections are constrained by controls over broadcasting. Money buys boots on the ground, billboards, direct mail, call centers and now digital advertising. History, though, shows a bigger war-chest does make a difference.

In the U.K.’s 1975 vote on the EU’s precursor, the Common Market, the “in” campaign amassed the equivalent in today’s money of about 15 million pounds, while opponents raised 1 million pounds, according to Tim Bale, professor of politics at Queen Mary University of London.

That helped tip the balance in favor of staying in, with 67 percent backing the EU, he said. The earlier spending is key, Bale said.

“If money will make a difference in the EU referendum, it’s money already committed and probably already spent," he said.

Big Backers

The organization most likely to win lead status for the remain camp -- Britain Stronger in Europe -- has snapped up big-ticket contributions early in the campaign.

Led by former Marks & Spencer Plc Chairman Stuart Rose, it secured seed funding last year from David Sainsbury, whose great-grandfather set up the supermarket chain J Sainsbury Plc. David Harding, the founder of $30 billion hedge fund Winton Capital Management, also kicked in startup cash late last year and joined its board as co-treasurer. Both Sainsbury and Harding declined to comment.

U.S. banks meanwhile have poured in money, concerned that a U.K. exit from the EU could cripple their operations in London.

Goldman Sachs donated 500,000 pounds, a spokeswoman said, and its top London-based executives publicly endorsed the campaign to remain in the EU. JPMorgan gave $500,000, while Morgan Stanley also stumped up a six-figure sum, according to people familiar with the situation. JPMorgan and Morgan Stanley declined to comment.

Obama Adviser

Lead campaigners will file their first pre-poll spending report at the end of April in line with Electoral Commission requirements, spokesman James McGrory said. He declined to say if the group would disclose donations it received before Feb. 1.

What is known is that the Stronger In camp has enough money to employ 70 people and have hired high-profile strategists. They include Jim Messina, who ran U.S. President Barack Obama’s re-election campaign in 2012 and advised Prime Minister David Cameron in his electoral victory last year.

Funding for the competing groups vying to be the official "out" group remains murky. Vote Leave, the campaign backed by London Mayor Boris Johnson and a clutch of Conservative Party grandees, appears to have raised the most money early on.

It has brought together deep-pocketed business leaders who previously funded the Tory Party, including hedge fund manager Odey and Peter Cruddas, the founder of spread-betting firm CMC Markets. Cruddas last November told the Financial Times newspaper he had donated 1 million pounds to Vote Leave and said he expected the group to raise 20 million pounds. Cruddas declined to comment for this story.

Little Guys?

“All you can do is make sure the arguments come out,” Odey said of his donation, declining to say how much he gave.

Vote Leave campaign director Dominic Cummings declined to comment when asked how much it had banked. Among the "out" factions, only, the group funded by U.K. Independence Party donor and insurance executive Arron Banks, discloses its funding arrangements, saying it’s on track to spend 3.5 million pounds by the end of March.

The Electoral Commission promised greater transparency on contributions for future ballots after voters rejected Scottish independence in a referendum in 2014. This time, the stakes are higher in what Prime Minister David Cameron has called a “once in a generation” decision on the EU, but the money trail remains as opaque as ever.

Opponents of the EU have tried to frame the vote as a fight between the establishment and the little guy, a false dichotomy when you look at who is backing the leave camp, said Pat McFadden, a Labour member of parliament.

"This is not the people versus the establishment," he said. "The leave side has some very wealthy backers.”

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