Finance chiefs in London are preparing a fresh round of lobbying for lower taxes and looser regulation to sugar the pill of Brexit and maintain Britain’s appeal in the global competition between financial centres.
As Theresa May’s government prepares to activate Article 50 and start the two-year process of leaving the EU this month, senior City financiers are already drawing up ways to protect the sector’s interests.
“The challenge for the UK is not to assume it’s unassailable,” said John McFarlane, chairman of Barclays and TheCity UK lobby group, in an interview with the Financial Times. “Advantage needs to be renewed.”
Mark Hoban, a former Treasury minister, has been asked by TheCityUK to work with his former employers PwC to produce a report entitled “Vision 2025” examining ways to enhance the UK financial services industry after Brexit.
Executives met last week to thrash out ideas, which include making skilled immigration easier, particularly to encourage the development of the financial technology “fintech” sector, and regional supervisory offices.
“There is absolutely no appetite for a regulatory bonfire,” said Miles Celic, chief executive of TheCityUK. “But there is space for a tonal shift.”
As an example, he said Solvency II rules for insurers could be adjusted to encourage infrastructure investment. Others would like the EU’s widely loathed bonus cap to apply only to UK banks’ operations in Europe.
“There needs to be a tangible, compelling economic or collateral reason to be here or to do business here, rather than somewhere else, and this needs to be renewed continually,” said Mr McFarlane.
Big banks, insurers and asset managers with operations in the UK have drawn up contingency plans to cope with a “hard Brexit” that takes the UK out of the EU single market and would make them unable to do business across Europe from Britain. Many are preparing to set up EU headquarters in Frankfurt, Dublin, Paris, Luxembourg or Amsterdam.
Most Wall Street bosses believe New York will be the big winner from Brexit, especially because US President Donald Trump has promised to cut taxes and regulation. Meanwhile, banks, including HSBC and Credit Suisse, are shifting resources to faster-growing Asian markets and many have already moved back-office jobs from London to cheaper locations.
David Davis, the Brexit secretary, said on Wednesday that the government had not made a thorough assessment of the economic impact of leaving the EU without a deal. But fans of a “Singapore on steroids” model for the UK as a low-tax, offshore centre were encouraged in January when Mrs May and her chancellor Philip Hammond said that, if the EU imposed a punitive deal on the UK, it would respond with tax cuts.
Anthony Browne, head of the British Bankers’ Association, called on the government to “normalise” bank taxation, by scrapping the levy and corporation tax surcharge that are due to raise £23.4bn from the sector over six years.
“We understand the government’s need to close the fiscal black hole, but if you want to become more attractive as a global financial centre then having a range of bank-specific taxes is not a good way to go about it,” he said.
“We are committed to global financial standards, set by the G20 and the Basel Committee,” he said, warning that ripping up EU rules would reduce the chances of securing access to the European market based on regulatory equivalence.
He called for trade deals to be struck with countries such as Canada and Australia to offset business lost because of Brexit, adding that the BBA had started work of its own on how to defend the future of the City.
Copyright The Financial Times Limited 2017.
