Golden lesson from 1992

MY COLLINS diary provides a reminder that every day is an anniversary of something. this week we have been blessed with financial markers.

thursday was the anniversary of the run on northern Rock and today it is 25 years since Black Wednesday, the turbulent day when Britain was ejected from the exchange Rate Mechanism.

Reflecting on events, the then chancellor norman Lamont confessed to reporters in Washington (including this writer) that his wife heard him singing in the bath.

The 1992 erm shock, retraced in six days In september, a book from think-tank OMFIF, has a direct parallel with Brexit.

Freed from the chains of keeping up with the deutschemark in 1992, the pound slumped 15pc. that is precisely the same depreciation as took place in the hours following last year’s referendum.

A quarter of a century ago, the economy received a double boost. Freedom from the erm made UK exports more competitive with the rest of the world and allowed the Bank of england to lower interest rates and end a credit crunch.

Remarkably, a new system of targeting inflation meant the impact of the devaluation on prices was muted. Under the tutelage of chancellor, Ken Clarke, the UK embarked on a long period of above-trend growth. the economy handed to tony Blair and Gordon Brown in 1997 was in sound shape, allowing Labour the room for a spending spree on public services.

Once the shock of the erm debacle had been absorbed and the loss of £3.4bn of foreign exchange reserves mitigated, opponents of closer relations with europe dubbed september 16 Golden Wednesday.

Brexit has been a jolt on a similar scale. Remain supporters view it as an economic disaster. they argue that devaluations don’t work any more because of manufacturing decline, and point to the failure of exports to respond to the pound’s fall after the collapse of Lehman Brothers. there is a big difference. the world economy came to a shuddering halt after the financial crisis, with trade falling over a precipice.

In contrast, firms currently are able to take advantage of a recovering economy, with the IMF forecasting rising global output of 3.5pc this year and 3.6pc in 2018.

Businesses across the land have shown confidence by investing in workers, allowing the jobless rate to fall to just 4.3pc.

What, then, about exports? the Office for national statistics says manufacturers’ export volumes climbed by 9pc between the third quarter of 2016 and the second quarter of 2017. this gives lie to claims that the Brexit depreciation is failing.

entrepreneurs such as James dyson and Christopher Bailey of Burberry see the opportunity. Global firms like Rolls-Royce are reaping a currency benefit which can be used to invest. As former prime minister James Callaghan once said: ‘Crisis? What crisis?’

Opening up

The inclination of Andrew Bailey is to be as transparent as possible. so the Financial Conduct Authority boss almost certainly has a legal basis for not publishing in full a report into the 2014 allegations that Royal Bank of scotland’s Global Restructuring Group bullied firms into bankruptcy after the financial crisis so as to grab assets. Of the companies sent to the GRG unit, only 10pc emerged in one piece, suggesting the system was rigged.

the difficulty for the FCA is that much of the report has already leaked, the treasury select committee is demanding full disclosure and it is up against a formidable and noisy enemy in the shape of the RBs-GRG Business Action Group.

the worry is that if the study were to be published, then subsequent discipline or prosecutions could be compromised.

History shows if sufficient pressure is applied – as was the case with the FCA report on HBOs – the documents are released anyway. Bailey should publish and be damned rather than find himself on the back foot.

Tech lodgings

As Home to artificial intelligence, fintech and much else, London needs all shared working spaces that can be mustered.

A gap is being filled by colourful Israeli tycoon teddy sagi, the entrepreneur behind Playtech, through his workspace brand Labs, which has rapidly leased 27,000 sq ft of space at new Hogarth House in central London and a portfolio in Camden.

Great space for start-ups is critical for Britain’s tech future as long as they are properly defended against foreign marauders.