Keep Calm and Save the EU

There's too much at stake for the City should the U.K. leave the European Union. Photographer: Chris Ratcliffe/Bloomberg

Financial services have such a dominant role in the U.K. economy that the country can't prosper unless the City, London's financial district, does. Yet banks and other financial companies have had little to say about the biggest issue clouding their future and that of the wider economy: Britain's possible departure from the European Union.

Prime Minister David Cameron has promised a referendum on EU membership by the end of 2017 -- assuming his Conservative Party wins re-election in 2015. At the moment, a Tory majority is looking unlikely, and the opposition Labour Party says that if it won, it would hold a referendum only if the U.K. is asked to cede more powers to the EU. Still, the EU is unpopular, and current polling points to a close call. It's quite possible that British voters, given the choice, would elect to quit.

That would be bad and possibly catastrophic news for the City. Without further delay, leaders of the financial services industry should start explaining the dangers of an exit from the EU.

Why the reticence to date? Two main reasons, as Stephanie Baker and Ben Moshinsky report in Bloomberg Markets. Right now, with the crash a vivid memory, the City is about as popular in the U.K. as Wall Street is in the U.S. There's a fear -- and it's warranted -- that too strident a pitch about what's good for the City might have the opposite effect on the electorate than the one intended. Staying out of what is already a heated political debate seems wise. Also, the opinion that an exit from the EU would badly hurt U.K. financial companies, though widely held in the industry, isn't universal. It's not as though the City would be speaking with one voice.

Such mixed feelings should come as no surprise. The EU's efforts to strengthen and extend financial regulation have aroused intense opposition in the City. Some of these reforms make sense; others don't. Cameron's government has taken EU institutions to court over rules it sees as misguided and, in some cases, unfairly directed at U.K. interests. Some of these legal battles, including one over a proposed financial transactions tax, aren't settled.

The City applauds this resistance. Yet it also understands what's at stake if the U.K. leaves the union. Yes, London is a global financial center, but much of its business depends on links to Europe. Restrictions on commerce with Europe and curbs on the free movement of capital and people would wound the whole economy, but banking and finance are especially exposed to a loss of business to Frankfurt or Paris. A 2013 survey showed that more than 80 percent of financial leaders want the U.K. to remain a member.

The City needs to speak up. If it doesn't, the U.K. can't have a proper debate or make a fully informed choice.

--Editors: Clive Crook, Michael Newman.

To contact the editor on this story:
David Shipley at