Who to Call? Scrambled Brexit Communications Worry U.K. Bankersby and
Confusion adds to industry concern on role post-Brexit
May’s government sending conflicting messages to bankers
A British bank executive recently approached Prime Minister Theresa May’s office with a question. The Treasury said it was the point of contact for discussing Brexit issues. The Department for Exiting the European Union said the same thing. Who was right?
Neither, he was told. Talk to us instead.
That story, retold by a banker who asked to remain anonymous, is symptomatic of industry complaints about engaging with May’s government as it begins pulling Britain out of the European Union. May has already put financiers on notice that they’re losing their privileged perch in policy making considerations, so the communications confusion only serves to deepen their anxiety.
“The government needs to develop a more strategic and joined-up approach around financial services,” said Andrew Gray, head of Brexit for U.K. financial services at PricewaterhouseCoopers LLP in London. “There are a number of different government departments seeking to get their voices heard on Brexit, and that’s resulting in some rather mixed messages being delivered."
The portrait of bungled communications, which could prompt banks to accelerate the movement of highly paid jobs from London, emerged from interviews with government officials, bankers and lobbyists. Financial services account for almost 12 percent of the economy, more than 1 million jobs and over 60 billion pounds ($73 billion) of annual tax revenue.
May herself has done little in public to quell worries among bankers aside from meeting representatives of the industry during a recent trip to New York. Officials at last week’s Conservative Party conference said banks will get no special favors in the Brexit negotiations and suggested banks threats to leave London are empty.
The days when 10 Downing Street and the Treasury put the interests of the City of London at the top of their list of priorities were over, said one of May’s ministers, asking not to be named. The new government must focus on small and mid-sized businesses, too, the minister said.
With banks resigned to losing the so-called passporting rights that allow them access to the rest of the EU from their bases in London, they are now focusing their lobbying on winning a transitional deal to preserve the status quo until a long-term relationship is forged.
The banking industry’s concerns were on full show at a London conference on Tuesday at which James Bardrick, the U.K. head of Citigroup Inc., said lenders are trying to work out how soon they must carry out contingency plans to protect their businesses.
“If we are outside the EU and we don’t have what would be a stable and long-term commitment to access the single market then a lot of the things we do today in London, we’d have to do inside the EU-27,” said Rob Rooney, chief executive officer of Morgan Stanley International, the Wall Street firm’s most senior banker in Europe.
A major dilemma for banks is that they are used to dealing with the Treasury, now run by Chancellor of the Exchequer Philip Hammond. While the department is seen as sympathetic to their concerns, the nagging worry is it lacks the power it once did since it’s not on the Brexit frontline.
David Davis is set to negotiate the withdrawal, Boris Johnson helms the Foreign Office and Liam Fox has the job of striking trade deals. All campaigned for Brexit, unlike Hammond.
The result is conflicting messages on finance. Hammond took office in July having told bankers he knew “access to the single market is crucially important to your industry” and “we want to work collectively with you” to ensure it’s maintained. Officials now say he accepts Britain may have to give up membership of the market.
Meantime, Davis has made barely any mention of banks in his public appearances and just passing references to the industry in a 2,000-word essay he wrote on Brexit prior to entering office.
As for Johnson, he told a gathering of American bank executives over the summer that the U.K. would keep full passporting rights even while ending the freedom of EU citizens to live and work in the U.K., according to two people briefed on the meeting. That is rejected as impossible by European governments keen not to grant too many concessions to the British.
The irritation runs two ways. Government officials bemoan banks have been overly loud in threatening to shift jobs and also question who they are supposed to engage with in the industry given a plethora of lobby groups and the establishing of a panel of bank chairmen under Santander U.K. Plc’s Shriti Vadera.
Still, a banker working for an American firm who visited the Tory conference was left with the impression that pro-Brexit lawmakers were uninterested in hearing bad news or the challenges faced by banks.
Ministers suggested the banks could overcome their problems by opening token “brass plate” operations inside the EU and keeping the brunt of their workers in London, a proposal that is naive, according to the banker who asked not to be named.
One of May’s officials, also speaking on condition of anonymity, acknowledged there was a communications problem with banks, but argued that having different departments talk to them enabled all branches of government to secure a good grasp of the issues.
“The whole of government is engaged with consulting the sector to ensure our approach will cut the best deal for Brexit,” a government spokesperson said. “London is regarded as the world’s leading financial hub with the largest market share in the world for financial services so it’s in everyone’s interest that it continues to thrive.’’