May’s Ministers Rush to Smooth Bankers’ Ruffled Brexit Feathers

  • Davis, Fox keen to show support for London’s banking industry
  • Treasury says it’s collaborating closely with prime minister

British Banks Edge Closer to Post-Brexit Exit

Prime Minister Theresa May’s government is seeking to quell fears among bankers that it won’t fight for the finance industry as it prepares to pull Britain out of the European Union.

Brexit Secretary David Davis said Thursday that he is “determined to get the best possible deal” for London-based banks after privately clashing with Chancellor of the Exchequer Philip Hammond over how to balance the conflicting goals of curbing immigration and accessing the single market. Meantime, Trade Secretary Liam Fox is planning to meet finance executives to soothe their concerns over Britain’s future relationship with the bloc, according to an official who spoke on condition of anonymity.

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The two-fronted charm offensive by top-ranking government figures who campaigned for Brexit aims to soften the perception of May’s first 100 days in office that she is ready to sacrifice Britain’s role as a global financial hub to cut back on immigration. May’s office has ordered a leak inquiry after briefings against the chancellor appeared in newspapers last week, an official said. 

“Everyone realizes that financial services is a key part for the Brexit negotiations," Anthony Browne, chief executive officer of the British Bankers’ Association, told Bloomberg Television on Thursday. "If you’re going to make a success of Brexit, part of that is making sure we continue as a financial services center for Europe.”

Three Against One?

Until now, Hammond was repeatedly left to promote the cause of the City of London virtually alone as May, Davis and Fox instead signalled their priority was reducing the flow of labor into the U.K. rather than safeguarding trade.

Bankers took that to mean the U.K. would be shut out of the single market, forcing them to consider moving workers and operations overseas. Restricted access means U.K. financial firms could lose as much as 40 billion ($48 billion) in revenue and put 70,000 jobs at risk, according to consulting firm Oliver Wyman.

After newspapers speculated the chancellor may quit -- and his people moved quickly to deny it -- there is an effort to show a united front. Hammond came out to say he was at the heart of Brexit planning while Treasury officials say May’s office is now working more closely with them to ensure coordination about the government’s economic message.

Same Hymn Sheet?

After her office expressed "full-confidence" in Hammond on Monday, pro-Brexit ministers who had previously voiced differing views on the importance of financial services are now lending Hammond some support in defending his line that the City remains a "high priority."

“We have to treat as absolutely central to what we do maintaining the stability of both the City but also the European financial markets,” Davis said on Thursday at the House of Commons. “The European financial markets are a little fragile over the last few years.”

This marks a shift in tone from when May outlined her Brexit vision at the Conservative Party’s conference earlier this month. Back then, she gave the strong impression that banks would get no special favours in the Brexit negotiations as she savaged the rich "international elites" who have gained at the expense of ordinary people.

Pound Plunges

As well as alienating the world of finance, such rhetoric also pushed the pound to a three-decade low and her criticism of loose monetary policy led to a public slap-down by Bank of England Governor Mark Carney who said the independent central bank won’t “take instruction” from politicians.

The shared approach will be a relief to Hammond, who flew to New York straight after May’s closing Tory conference speech in what became a damage-control mission to reassure U.S. bank chiefs. He then moved on to the International Monetary Fund’s annual conference in Washington, where May’s attack on globalization dominated the conversation on the sidelines.

Still, it remains to be seen in which direction May will steer the ship. She’s made it clear the government will not reveal its negotiating position ahead of talks set to begin by the end of March. This means that, for now, the U.K.’s future in the single market must remain something of a mystery.

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