UK banks fear politicians set against them on Brexit

LONDON: For decades, Britain’s bankers have relied on their industry’s outsized status in the economy to find a receptive ear in government. But in the aftermath of the country’s vote to leave the European Union, the sector that generates about a tenth of national economic output is grappling with an uncomfortable new reality where economics doesn’t always trump politics.

June’s vote to quit the EU has triggered a change in leadership and tone in the British government with new Prime Minister Theresa pledging an industrial revival and to build “an economy that works for everyone” - setting nerves jangling in the City of London global financial hub.

Reuters spoke to several senior bankers from big British and international banks based in the city, including some involved in discussions with the government over Brexit. Many said their warnings about the impact of a socalled hard Brexit - where they lose their access to the European single market - were being met with scepticism by the government and accusations from some eurosceptic lawmakers that they were undermining the message that Britain can thrive outside the EU.

“It’s almost as if we were back in the 1940s and we were looking for fifth columnists all over the place because people are trying to do Britain down,” said Ronald Kent of the British Bankers’ Association (BBA). The term “fifth column” refers to a group of people that acts secretly against the state to assist an external enemy. The head of the BBA, Anthony Browne, said on Sunday that the public and political debate was “taking us in the wrong direction” and that big international banks were preparing to move some operations out of Britain in early 2017.

The government has pledged to execute Brexit following a vote to leave the European Union that was driven in part by a desire to curb immigration and was regarded as a repudiation of a London elite, including a banking sector still the subject of lingering public anger over its role in the financial crisis.

While finance minister Philip Hammond and his ministerial colleagues have been keen to assert the financial industry is of great importance, officials say privately the Brexit deal will have to work for the country as a whole and means the banking industry cannot expect special treatment.

“There is no question of prioritizing the financial sector, or any other sector in those talks - it’s not fair to talk in terms of special cases,” said one source with knowledge of the government’s approach to the negotiations with Brussels. The finance ministry referred a request for comment for this story to remarks made by Hammond to a parliamentary committee last week. He said addressing the Brexit challenges faced by the financial industry was a very high priority for the government. —Reuters