Carney warns EU: Hands off our currency billions
MARK Carney yesterday warned Brussels that any attempt to steal part of London’s mammoth currency trading business would hit the European economy.
The Bank of England governor said it was ‘in no one’s economic interest’ to move socalled euro ‘ clearing’ back into the European Union after Brexit, as threatened by the European Commission.
He said uprooting this lynchpin of the financial system – which ensures £750 billion of euro trading is carried out smoothly in London every day – could drive up costs by more than £19 billion a year.
‘Those costs would ultimately be passed on to European households and businesses,’ Mr Carney said in a speech at Mansion House in the heart of the Square Mile.
‘Fragmentation is in no one’s economic interest. Nor is it necessary for financial stability. Indeed, it can damage it.’
Despite his robust defence of the City, Mr Carney struck a gloomy tone about Britain’s prospects outside the EU.
In what appeared to be a swipe at Foreign Secretary Boris Johnson, he said: ‘ Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption.’ During the referendum campaign, Mr Johnson said Britain could ‘have its cake and eat it’ after leaving the EU by ending free movement of people but maintaining free trade with the Continent.
Mr Carney said workers were already suffering ‘anaemic wage growth’ and would face further pain through ‘weaker real income growth’ following Brexit. Highlighting the fall in the pound since the Brexit vote, he said ‘financial markets have marked down the UK’s economic prospects’.
Mr Carney said he was watching ‘how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations’. He also insisted ‘now is not yet the time’ to raise interest rates given the uncertainty facing the economy.
The governor’s comments will come as a relief for borrowers after the Bank last week came close to raising rates for the first time in nearly a decade. Three members of the panel that sets rates called for an immediate hike to 0.5 per cent to stop inflation spiralling out of control.
They were outvoted by the other five members, including Mr Carney, but the size of the split on the committee sparked speculation that a rate rise was on the way.
Howard Archer, chief economic adviser to the Ernst & Young Item Club, said: ‘The governor is particularly cautious over UK growth prospects as Brexit negotiations get under way. His cautious stance fuels our belief that interest rates will not be rising any time soon.’
The future of London’s clearing business – which supports more than 200,000 jobs – has become a major cause for concern in the City. Clearing houses stand between buyers and sellers in trades and guarantee that the money is paid if one side defaults. The City has developed a world-leading position in handling everything from dollars, euros and yen to Mexican pesos, playing a vital role in the financial system by taking on risk.
But Brussels last week said it could force euro clearing to move to an EU country after Brexit if officials felt London’s trading floors did not meet high enough standards.
Mr Carney said it would be better for regulators in Britain, Europe and elsewhere in the world to ‘ build robust cross-border arrangements’ to oversee clearing. He added: ‘It would produce far superior outcomes to other elements of the commission’s proposals, which would fragment global clearing activity and raise costs and risks.’
TODAY comes a timely reminder to Europe’s political and financial class of precisely why Britain voted Brexit a year ago this Friday.
In a hugely revealing mass survey, thinktank Chatham House finds a yawning chasm between the EU’s elites and the general public across the 28-nation bloc, with 71 per cent of privileged ‘influencers’ saying they’d done well out of the EU, against only 34 per cent of the public.
As for the EU’s failures, voters stressed the refugee crisis and migration, while the elite were worried chiefly about red tape.
If Jean-Claude Juncker and Co want to stop others following Britain, they should start listening, double quick, to those whose interests they profess to represent. AS four Barclays executives face fraud charges over actions they took to avoid a state bailout in 2008, this paper has a question. Isn’t there a certain irony in the fact that, while Lloyds and RBS took billions from taxpayers, the only bankers being prosecuted are those who sought to solve their problems without our help?