Will Whitehall power shifts leave financial services high and dry?
Throughout the week at the Conservative Party Conference, financial services representatives have talked about the need for a transitional arrangement for the sector. They hope to have a deal in place which will kick in after March 2019 once Article 50 has finished. There are concerns that the UK will not have completed the necessary negotiations before the end of the two year time limit and we will be forced into WTO agreement.
But what is also dawning on those in the sector is that their policy asks and pleas to the UK Government may not be prioritised in a way like they used to be. The Brexit result has changed so many things but two key factors are at play here.
Firstly, the new Government will be looking to address the public’s concerns which led to so many voting for Leave, particularly around immigration. Therefore, prioritizing curbs on migration will out rank the need to deliver unfettered access for the financial industry if it comes down to a trade-off. Rumours circulated Conference this week that Theresa May will give no special favours in the Brexit negotiations to British financial-services companies, so requests for a possible transitional period to help ensure financial stability, and minimize disruption to businesses’ ability to provide products and services to customers, may fall on deaf ears in Number 10.
Then there is the point that Philip Hammond does not have a same view point or the power as George Osborne. Hammond remains a trusted adviser to the Prime Minister but other cabinet members are assuming greater influence. He also has a wider view on the priority sectors in the UK. Hammond is pushing to win what he calls the “best deal” for manufacturers and financiers, and therefore bankers must no longer assume that the Treasury will speak up for them above all others in the corridors of power in Whitehall.
The sector should not give up hope. They should continue to work with the multiple Ministers, advisers, and civil servants over the next two and a half years to ensure the UK is in the best position possible for the negotiations with EU, and that political decision makers understand the business economics.
By Henry Groundes-Peace