Ominous noises. Brexit again.

“Just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I’ll be spending a lot more time there. #Brexit.” Thus tweeted Lloyd Blankfein, Chief Executive of Goldman Sachs, on 19th October. It was the first time a major American financial services firm had signalled a shift of its European operations away from London in this way: not as a decision conditional on future developments, but as an established fact of business life. It was the first, but presumably not the last.

It is too late to hope that the City of London, by many measures the world’s leading financial centre and an economic engine for both the UK and Europe, could emerge unscathed from Brexit. The City, which generates tens of billions of pounds each year in tax revenues, will suffer relative both to its competitors and to how it would have performed without Brexit and probably in absolute terms as well. Harm is now unavoidable. The UK is suffering from heightened risk and the vagaries of its politics since the Brexit vote, including the unexpected outcome of this year’s election, have reinforced that perception. There is no status quo scenario: even if the UK was somehow to remain in the European Union after all, that would be disruptive too. (Prospect Magazine, November 2017).

I suppose one way of looking at it is that the British financial sector has grown just too important to the economy and to government revenue,  sucking up bright young people, making London outrageously expensive to live in, and periodically causing economic meltdowns.  Problem is, what bright, new, modern industry can possibly  take the place of the City?   Can’t think of one?  Nor can I.

One Comment

  1. One of the worst aspects of Brexit, albeit a temporary one, is that it is distracting the government from other urgent matters. Whether it’s unaffordable housing, low productivity, inflation, poor infrastructure, or just the fact that economic growth is amongst the lowest in the developed world, the government’s solutions range from threadbare to non-existent. The only area where the government has made significant progress on recently is the environment, where Michael Gove has a detailed 25 year plan to improve it. Britain has gone from producing 40% of its electricity from coal six years ago to just 7% today. But on everything else, British politics feels distinctly American- endless gridlock, with very little real reform. It’s incredibly frustrating, particularly as the current sclerosis is likely to remain until the end of the transition period in 2020.

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