London financial sector warns Johnson about ‘no winners’ in a no-deal Brexit
▶ Bad feelings after an acrimonious split will push back a future settlement with Europe, the corporation’s policy director says
The City of London, which represents the interests of Britain’s powerful financial services industry, warned Boris Johnson yesterday there will be “serious consequences” from Brexit.
The warning comes as Mr Johnson appears set to embark on a premiership that severs Britain from the European Union with or without a withdrawal deal.
The former mayor of London and British foreign minister is expected to take the keys to 10 Downing Street as the next Conservative prime minister tomorrow amid a cavalcade of warnings about the dangers posed by his policy platform.
Catherine McGuinness, the corporation’s policy director, told The National that the uncertainty sapping the economy over the three years since the referendum to leave the EU had already been damaging.
“There are no winners from Brexit,” she said at the Guildhall headquarters of the City’s council.
A rancorous collapse of the withdrawal negotiations and sudden upheaval on October 31 would sour relationships needed to repair the immediate shock.
“Brexit has got to the point it is seriously damaging and a nodeal will be particularly damaging,” she said.
Mr Johnson has drawn support in the race against Jeremy Hunt by vowing to leave “come what may” on October 31.
The effects on business would be immediate, Ms McGuinness said. “No-deal Brexit would have really negative consequences,” she said.
“Big banks would be able to cope, but we worry about the state of readiness of SMEs. Fragmenting markets increases costs for institutions and reduces liquidity and makes lines of business unprofitable. Putting up barriers makes businesses become unprofitable.”
With 80 per cent of the UK economy made up of services, even the free trade agreement on offer with Brussels already has limitations for City financiers. In a sign of how the EU can cut off access to non-members, Brussels froze out Swiss stock market trading in June. European sources told Ms McGuinness that a settlement with the EU would be affected when the country leaves.
Bad feelings would mean a deal would only come in the long-term, with harmful consequences beforehand.
“We don’t have a choice – we will have to trade with this part of the world,” she said.
The fundamental global appeal of the British capital as a financial centre stood practically unrivalled since the Big Bang reforms in the mid-1980s.
Acknowledging some of these qualities have “diminished”, Ms McGuinness said the City was having to sell its strengths to the world in new ways.
“London remains an international financial centre. For the last couple of decades, it has been self-evident that people need to use London,” she said. “We now need to prove our case a bit better.”
So far, European rivals have taken bits of City business but Frankfurt, Luxembourg, Dublin and Paris have not seized whole chunks.
Sterling compounded its recent losses yesterday – the pound has fallen more than five per cent in recent weeks – after the country’s main economics think tank, the National Institute Of Economic and Social Research, said a recession may have already started.
“The outlook beyond October ... is very murky indeed with the possibility of a severe downturn in the event of a disorderly no-deal Brexit,” a report said.
Industry added its voice to the expressions of concern as the director general of the Confederation of British Industry, Carolyn Fairbairn, urged Britain’s next leader to “get the economy back on track”. She said business leaders feared the effects of a no-deal Brexit.
Political instability is certain to continue even after Mr Johnson takes over. Alan Duncan, a foreign office minister, resigned in anticipation that Mr Johnson would triumph.