Cookie Notice

However, this blog is a US service and this site uses cookies from Google to deliver its services and analyze traffic. Your IP address and user-agent are shared with Google along with performance and security metrics to ensure quality of service, generate usage statistics, and to detect and address abuse.

Wednesday, 1 July 2020

The City reboots itself

The threat from Brussels was as crude as one from any third-rate mafia hoodlum - 'Give us all your fish or we'll destroy the City'. The more old-maidish amongst the commercial gents, probably the sort who would have advocated giving Mr Hitler exactly what he wanted, were quick to point out in their broadcasts and newspaper columns that fishing was a tiny fraction of the UK's GDP, a piddling insignificant part of the economy, and should certainly be surrendered to save the City. Indeed, if Catastrophe May had still been in power, she would have tried to do so. Fortunately for us this government is made of sterner stuff.

The City itself seems to have shrugged-off the threats, as Matthew Lynn wrote yesterday in the Telegraph. Indeed, his entire piece is so upbeat it's hard to pick a single snippet to quote; we're turning our backs on EU regulation and our faces out to the world, and the City is starting to feel the stirrings of that old buccaneering spirit again, after forty years under the sclerotic over-regulation of the unelected officials in Brussels. It's not a puff-piece though - there's a potential hard reality -
Step by step, the City, under the control of the Bank of England and the Treasury, is shaping its own regulatory system. True, there are risks in that. The City may lose access to European markets. That matters. British financial exports to the rest of Europe amount to £26.1bn, or 21pc of total UK services sold across the Continent, and that is far more than we import. And yet, despite that, it is still the right decision.
My own view is that right now, and for the immediate future, the EU simply won't be able to deliver on its Covid rescue package without the City. They will make whatever post-transition adjustments they need to secure continued access to the bits of the UK financial services nexus they need. But their ambitions are still to displace London with a hub of their own - Frankfurt, Paris or Amsterdam.

Of the three, Amsterdam is the only serious contender and although, handicapped by the EU as it is, it will never overtake the City, it will provide healthy competition and stimulate continuous innovation and improvement in London. They're like us; northern, with a liking for legal probity. Germany is too corrupt, the courts too partisan and biased, shareholder protection the worst in Europe, creditor safeguards too low and business is endemically bent. Frankfurt is a dreary little provincial town, Paris is too frivolous and France too bankrupt.

Standing up to bullies has more benefits than just exposing their weakness. It allows us to discover we still have a spine - and for the City, the scent of freedom is intoxicating.


DeeDee99 said...

You'd think by now even Barnier would have understood that their threats have the opposite effect to the one they presumably want.

Anonymous said...

Well, the markets seem to have made their guesses as to winners and losers. The euro's up around ninety-one pence as I write.

Raedwald said...

I have every confidence, anon, that once the manipulation ends and post-transition the £ will be back up above €1.25, and the EU becomes once again the holiday playground with cheap wine for Brits that it is destined to be.

In the meanwhile the low rate suits us; German carmakers will despair as they can't raise their £ prices whilst UK exporters will enjoy the advantages. Good both ways!

Pat said...

The EU has always had the knives out for the city and always will. Appeasement is pointless.

Dave_G said...

Isn't ANYONE concerned when they read the statement:

"...under the control of the Bank of England and the Treasury" ???

Who runs this country? Us (via elected Government) or 'them'?

There is something SERIOUSLY wrong with this situation.

Span Ows said...

Dave_G. Yes, I am, I remember too Brown's triumvarate: BoE, HMT and the newly minted for that occasion FSA.

Anon, the Euro (as Radwald uses the apt word) has been manipulated for decades, long before the word 'Brexit' was on anyone's lips. Quite why you're so uptight about it is anyone's guess. At least you ahd a few months break from giivng us almost daily updates as to where the excahnge stood.

Re the tiny amount of GDP that is fishing etc, the other cannard is "well most Welsh and English fishermen sold their boats and quota" blah blah which the answer is "And?". Not quite sure what their point is.

jim said...

Money has no smell. The City will continue to make money, but how much? In the past the finance sector made enough to prop up almost the entire country. London could cheerfully ignore anything north of Watford, they hardly made any difference or were a cost, ignore them.

In those happy days the £/Euro was about 0.69? Today 0.91. But cheer up, back in 2000 the dollar was only 0.2 above its current value. Indeed the $/Euro is back where it was 20 years ago. Looking good Barnier.

So sure, the City will continue but in an emasculated form. The rest of the country will have to turn a penny (or nine) or be very poor indeed. Therein lies the rub, the underlying reason for Brexit - people felt left behind - has not gone away. Well they are going to feel a lot more left behind after Jan 1st. No Sunny Uplands, no Unicorns dancing on the hills. So what is Boris and Dommy doing to re invigorate places north of Watford and west of Bristol? Sod all so far.

But Covid is a saviour, a story that will cover the failure of Brexit and the lack of any plans for years to come. At least until 2024.

The tragedy is that neither Boris nor Dommy can do much. There is very little use for masses of ordinary people, their 'skills' are cheaper elsewhere. Business goes where the combination of skill, desperation, tax breaks, tariffs and transport optimise. But no worries, the City will make money, just not so much. House prices in Haselmere will hold up - pip pip.

Arkus said...

Amsterdam? HAHA not a chance. The City is not just a few blokes in pin striped suits and bowler hats making a few deals and raking in the cash. Its layer after layer of people with many years of experience in many fields.. settlements, legal, accounting, IT, management, customer management, marketing etc etc etc as well as of course, the deal makers, traders, sales people and the clever boffins. All of them with a wealth of experience and skills. There is not a centre in the EU that comes close to the city in that pool of knowledge and experience. Good Lord there are probably more people in and around the City with that kind of experience than the entire population of Amsterdam.
Besides that, anyone of any real use in those fields from Amsterdam, Paris, Frankfurt, Berlin etc is already in London or New York, whats left is third rate dross.
The EU is deluded if it thinks it can in any way challenge the city in the forseeable future, let alone exclude it.

Raedwald said...

Arkus - agree entirely. Add to your list UK commercial law and our legal and dispute resolution system, the probity of our courts and law officers, that we're Anglophone and in the right time zone, our richness of analogous professions and expertises, the critical mass of so many financial disciplines (commodities, currencies, insurance and re-insurance, venture capital funding etc as well as just the stock and bond markets) and it makes London's position extremely strong

However, they will create (or try to create) their own EU financial markets by excluding London which will have some success because using them will be compulsory. Then more regulation and a Tobin tax. Then even more regulation.

The money, of course, will flee.

Arkus said...

Raedders - yep spot on... they can try but it just won't work. Ever tried to work with financial institutions in those EU centres? Hopeless, corrupt, incompetent, lazy.
They'll make using them compulsory and the whole lot will fail.
And yes - the money will indeed flee.... and quickly.

Oh well, they can always fall back on fishing... oh.. hang on.

Mark said...

Tulipmania from Amsterdam?

Suspect the Euro farce will make that look like scrooge before too much longer

leila said...

The trouble is, Arkus, the EU fishing fleet is well established in African waters tearing the heart out of fish stocks ( together with the Japanese, the Chinese more concentrated in the Pacific) The Dutch have perfected their stun fishing method. I have never understood why the global powers do not devote more energy to world ocean fishing control. As a species we really do not deserve to survive.

David said...

The strength of the euro is transitory. Markets believe that the ECB is in charge and will prevent money-printing. In reality, governments have found that they can bypass central banks and create money via guaranteeing commercial bank lending, which consequently is finally growing rapidly. All currencies are about to lose value via inflation.
Re. challenges to the City, Amsterdam is not in my opinion a potential rival. (I have worked in financial services there). The Netherlands is too consensual and hierarchical, whereas markets function on disagreement and dissent. The horlicks of ABN AMRO in the GFC shows where this leads. London's business will be largely unimpaired by no-deal Brexit and if the Commission are stupid enough to try and move euro-clearing they will mess it up and harm their own institutions because centralising clearing and netting off different currency positions positions for collateral purposes is key to efficient use of capital and market liquidity.

Too stupid for your own good. said...

Dommy. Hur, hur, hur.
Funee coz he drive car. Bad man hur hur,
Jim. Funneee! Hur, hur hur.

Me vote labour now Jim show fick norferner way.

Dave_G said...

Trading 'money' is surely the reason why we're in such a dire position financially - derivatives for example, manipulated markets and precious metals etc.

We'd be far better off abolishing financial trading altogether.

John Brown said...

“Germany is too corrupt, the courts too partisan and biased, shareholder protection the worst in Europe, creditor safeguards too low and business is endemically bent.”

Doesn’t the Wirecard scandal effectively sink Germany as a rival to the City where not only was Wirecard seriously falsifying its accounts but the German financial regulator ignored the warnings, failed to investigate and even worse, when a whistleblower within Wirecard helped unearth more evidence of fraud, it sided with the company in trying to silence the allegations?

The German regulator filed a criminal complaint against Financial Times journalists for reporting the allegations, and it banned short sales of the company's shares to ease downward pressure on the stock price.

This is in addition to the massive German diesel emissions testing scandal - for which our consumers have yet to be compensated - and many examples of illegal state aid and hence yet another reason why we needed to leave the EU.

Greg T said...

Dave G
Ah, you noticed
Instead of "unelected Brussel bureaucrats" - we get unelected SPADs for arrogant incompetent & coorupt ministers ( e.g. Dominator Scummings / Jenrick )

PRECISELY: feel a lot more left behind after Jan 1st. No Sunny Uplands, no Unicorns dancing on the hills.

Swanno said...

Scientists have called for tests to locate those who still think Brexit is going to be great, so that they can be isolated from the rest of society.

Mindless enthusiasm for Brexit is not falling as quickly as it should and is taking a heavy toll on communities, particularly among the elderly and red-faced men with high blood pressure.

Chief scientist Tom Logan said: “People need to check themselves for symptoms. Do you run a high temperature whenever someone so much as mentions the existence of Belgium?

“Do you experience a tightening of the chest when you watch Question Time and someone in the audience or on the panel expresses an opinion slightly less deranged than that of Mark Francois?

“If so, you must self-isolate. This is to avoid contaminating others, but also to stop people having to listen to your tired old slogans from 2016, for example, ‘They need us more than we need them’.

“You’ll be required to isolate for 14 days initially, and if necessary for months afterwards until someone finds a vaccine against fabricated stories in the Express.”

He added: “Young people must not assume they are immune. None of your mates may have caught it yet, but you’ll look like a weirdo if you’re 18 and saying ‘We survived the war’.”

Elby the Beserk said...

Fishing and GDP. FFS. The reason the share is so low is that the EU destroyed our fishing industry, hence many of the business dealing with it as well.

Anonymous said...


I notice you are putting new posts alternate days rather then every day- its a good idea. It takes me a day atleast a day to absorb a post, and fashion a reply if I feel strongly, yet another day. With new posts every day, I'm always behind, as the caravan has moved on. So thank you for the change to alternate day postings.

On Brexit, yet again the attention is on the City. Brexit though is far more then just money. It is above all, the laws we follow, long established in custom and precedence. It is these laws incidently, that underwrite the financial practices of the City that you prefer.


Mark said...

You watch question time?

Well that explains it I suppose.